[Graphic]
Federated Investors
Federated World Utility Fund 4TH ANNUAL REPORT NOVEMBER 30, 1997 ESTABLISHED
1994
President's Message
[Graphic]
Dear Fellow Shareholder:
Federated World Utility Fund was established in 1994, and I am pleased to
present the fund's fourth Annual Report, which covers the 12-month fiscal year
reporting period from December 1, 1996 through November 30, 1997.
This fund provides shareholders opportunities for income and capital growth by
owning approximately 100 stocks and convertible securities in electric, natural
gas, water and telecommunications companies in the U.S. and around the world.
The report begins with a discussion with the fund's portfolio manager Drew
Collins, Senior Vice President, Federated Global Research Corp. Following his
discussion is a series of investment illustrations showing the fund's
performance, which are proceeded by a complete listing of the fund's global
investments, and the fund's financial statements.
Federated World Utility Fund has had another good year in 1997 recording
double-digit total return performance. As the portfolio manager's comments
indicate, the environment for international utilities continues to be highly
favorable.* The performance for each share class follows.**
TOTAL CAPITAL NET ASSET
RETURN INCOME GAIN VALUE INCREASE
Class A Shares 19.08% $0.38 $0.43 $12.69 to $14.16 = 12%
Class B Shares 18.04% $0.29 $0.43 $12.68 to $14.12 = 11%
Class C Shares 18.24% $0.29 $0.43 $12.67 to $14.14 = 12%
Class F Shares 18.99% $0.38 $0.43 $12.70 to $14.16 = 11%
We trust you are pleased with the continued positive performance of your
investment in Federated World Utility Fund. Utilities are an essential part of
the fabric of society in every country. The appetite for these basic services
worldwide is enormous. The fund is well positioned to benefit as the standards
of living around the world improve.
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
** Performance quoted, based on net asset value, represents past performance and
is not indicative of future results. Investment return and principal value will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Total returns for the 12-month reporting period
based on offering price for Class A, B, C, and F Shares were 12.52%, 12.19%,
17.15% and 16.70%, respectively.
Thank you for joining the growing number of shareholders who have entrusted this
global utility fund with more than $48 million.
Remember, adding to your investment account and reinvesting your quarterly
dividends in additional shares is a convenient, painless way to "pay yourself
first," and enjoy the benefit of compounding, and future income from the shares
you buy today.+
We welcome your comments and suggestions.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1998
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
Investment Review
[Graphic]
Drew Collins
Senior Vice President
Federated Global Research Corp.
[Graphic]
OVERALL, IT WAS A VERY STRONG YEAR FOR UTILITY STOCKS WORLDWIDE. WHAT IS
YOUR ANALYSIS OF THE GLOBAL UTILITY MARKET DURING THE FUND'S FISCAL YEAR?
The global utility markets were one of the best performing sectors during 1997.
The FT/S&P Global Utility Index posted a total return of 26.04% for 1997.* The
performance of the index was fueled by strong gains in the U.S. market, as well
as in Europe. In addition, the utility sector was viewed by investors as a safe
haven from the recent market volatility.
Overall, the utility sector offered investors a surprising growth story coupled
with a stable source of income. The sector's performance outpaced many others
because of the continued consolidation and liberalization of the industry as a
whole.
In particular, the telecommunications industry in the U.S. saw large gains from
many of the local and long distance companies. Because markets have slowly
deregulated over the course of 1997, telephone operators have made a mad dash to
gain market share in the long distance segment of their business. This
phenomenon has pushed one-time competitors to join together and form global
alliances in an effort to grow their business for the future. This is clearly
most evident as seen by WorldCom's purchase of MCI.
We expect the utility markets to stay buoyant during 1998 because of the
continued consolidation of the industry worldwide, the need for efficiency
gains, increased liberalized markets, and a focus on shareholder value creation.
* FT/S&P Global Utility Index is an unmanaged, market cap-weighted index of
utility securities from 24 countries, both developed and emerging markets, with
approximately 174 companies. Investments cannot be made in an index.
[Graphic]
HOW DID FEDERATED WORLD UTILITY FUND PERFORM OVER THE 12-MONTH REPORTING
PERIOD?
The fund delivered a strong total return of 19.08% for Class A Shares, 18.04%
for Class B Shares, 18.24% for Class C Shares, and 18.99% for Class F Shares,
based on net asset value.** The overall world utility market total return, as
measured by FT/S&P Global Utility Index, during the fund's reporting period was
23.63%.
The fund underperformed the index for two reasons. First, the strong U.S. dollar
eroded dollar-based returns across the board. For example, the MSCI European
Index+ returned 37.97% in local currency for 1997 but only 23.80% in dollar
terms. Second, many international markets were dragged down due to the recent
Asian currency turmoil. Not only did the Asian markets perform poorly, but the
negative currency impact drastically impacted the overall return.
On a more positive note, throughout the course of the year, Federated World
Utility Fund had less than 10% of its total assets invested in the Asian region.
Even a small weighting had an adverse impact on the performance of the fund.
[Graphic]
WHAT WERE SOME OF THE FUND'S RECENT UTILITY PURCHASES?
Recent purchases included the following companies:
AT&T (2.0% of assets)--Regarded in previous years as inefficient, this U.S.
long-distance telephone company is undergoing a radical change to become a
global communications provider. The company has recently sold non-core assets
and has taken steps to bolster its global alliances with joint ventures and
partnerships around the world. Further, AT&T plans to enter the U.S. $100
billion local telephone market by way of a future acquisition or merger.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns for the 12-month reporting period based on offering price
for Class A, B, C, and F Shares were 12.52%, 12.19%, 17.15% and 16.70%,
respectively.
+ The Morgan Stanley Capital International Europe Index is an unmanaged market
value-weighted average of the performance of over 500 securities listed on the
stock exchange of 13 countries in the European region. This index is unmanaged
and investments cannot be made in an index.
BRITISH ENERGY PLC (2.8% of assets)--This nuclear power company, located in the
United Kingdom, provides electricity through eight power stations in England and
Scotland with a capacity of approximately 9,600 MW. The low-cost energy produced
through nuclear power plants has allowed British Energy to maintain margins in
the U.K. electricity sector, thus giving it a competitive advantage. This has
surprised the market as the U.K. electricity industry has been liberalized for
competition.
CABLE AND WIRELESS COMMUNICATIONS PLC (1.1% of assets)--This company is an
integrated telecommunications company operating throughout the United Kingdom.
It provides telecommunication, television entertainment and information services
nationally in approximately 138 cities and towns. C&W Communications also
provides a range of multi-channel television and Internet services, and mobile
telecommunication services.
VIAG (1.5% of assets)--This German electricity power producer is the third
largest generator in the country. Having long been an inefficient power
operator, Viag has taken appropriate measures to streamline business as the
German electricity market prepares for open competition. The company recently
sold non-core assets and rechanneled its focus on shareholder value. In the year
to follow, Viag will enter the faster growing cellular communications market as
one of the leading providers in Germany.
[Graphic]
THE PREVIOUS REPORT THAT COVERED THE FIRST SIX MONTHS OF THE FUND'S FISCAL
YEAR, FOCUSED ON THE CELLULAR COMMUNICATIONS INDUSTRY AND UTILITY STOCKS
THAT WERE UNDERVALUED COMPARED TO THEIR REGIONAL PEERS. DID THESE STRATEGIES
CONTINUE TO BE THE MAJOR INFLUENCES ON PERFORMANCE?
These strategies of focusing on the cellular communications industry and
purchasing undervalued companies relative to their peer group worked to our
advantage during the course of 1997.
As stated before, the utility industry has undergone significant changes during
the past decade. Recent global deregulation in many utility markets has forced
businesses to rechannel their thinking to remain competitive. In particular, the
basic telephone operators and the electric utilities in Europe have entered the
cellular telephone markets. The reason for this transition is the cellular
telephone market offers higher growth and operating margins. This in turn
creates greater profits over the long run. Federated World Utility Fund
participated both directly and indirectly in the cellular communications
business. Many of the fund's purchases were bought at a significant discount to
their assets or to their peer group.
Our strategy in 1998 will continue to focus on undervalued companies that offer
value creation over the long-term.
[Graphic]
WHAT WERE THE FUND'S REGION WEIGHTINGS AT THE END OF THE REPORTING PERIOD?
As of November 30, 1997, the fund's region weightings were as follows:
PERCENTAGE
REGION OF PORTFOLIO
U.S. 45.49%
Europe 27.92%
Latin America 10.24%
Canada 4.41%
Asia ex Japan 5.16%
Japan 2.90%
Australia 3.88%
Total 100.00%
WHERE IN THE WORLD SHOULD YOU INVEST?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND FEDERATED EMERGING MARKETS FUND FEDERATED
EUROPEAN GROWTH FUND FEDERATED INTERNATIONAL EQUITY FUND FEDERATED INTERNATIONAL
GROWTH FUND FEDERATED INTERNATIONAL HIGH INCOME FUND FEDERATED INTERNATIONAL
INCOME FUND FEDERATED INTERNATIONAL SMALL COMPANY FUND FEDERATED LATIN AMERICAN
GROWTH FUND FEDERATED WORLD UTILITY FUND
Employ highly qualified, experienced managers in global investing to select
countries and companies outside the U.S. for long-term growth potential.
Call your investment representative to buy shares of 8 international equity
funds and 2 international income funds from Federated Investors.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL 1-800-341-7400 TO
ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU INVEST.
Foreign investing involves special risks including currency risks, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED WORLD UTILITY FUND
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $4,000 IN THE CLASS A SHARES OF
FEDERATED WORLD UTILITY FUND ON 4/22/94, REINVESTED YOUR DIVIDENDS AND CAPITAL
GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD BE WORTH $6,156 ON
11/30/97. YOU WOULD HAVE EARNED A 12.69%* AVERAGE ANNUAL TOTAL RETURN FOR THE
3-YEAR INVESTMENT LIFESPAN.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends,
gaining the benefit of compounding at the same time.
As of 12/31/97, the Class A Shares' average annual 1-year and since inception
(4/22/94) total returns were 14.41% and 13.46%, respectively. The Class B
Shares' average annual 1-year and since inception (7/27/95) total returns were
14.35% and 17.48%, respectively. The Class C Shares' average annual 1-year and
since inception (7/27/95) total returns were 19.21% and 18.92%, respectively.
The Class F Shares' average annual 1-year and since inception (4/22/94) total
returns were 18.92% and 14.60%, respectively.** [Graphic representation omitted.
See Appendix #1.] * Total return represents the change in the value of an
investment after reinvesting all income and capital gains, and takes into
account the 5.50% sales charge for Class A Shares.
Data quoted represents past performance and does not guarantee future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
** The total return stated takes into account the 5.50% sales charge for Class A
Shares, the 5.50% contingent deferred sales charge for Class B Shares, the 1.00%
contingent deferred sales charge for Class C Shares, and the 1.00% contingent
deferred sales charge for Class F Shares.
FEDERATED WORLD UTILITY FUND
ONE STEP AT A TIME:
$1,000 INVESTED EACH YEAR FOR 3 YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL
GAINS) GREW TO $5,341.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Federated
World Utility Fund on 4/22/94, reinvested your dividends and capital gains, and
did not redeem any shares, you would have invested only $4,000, but your account
would have reached a total value of $5,341* by 11/30/97. You would have earned
an average annual total return of 14.24%.
A practical investment plan helps you pursue long-term performance from domestic
and international utility securities. Through systematic investing, you buy
shares on a regular basis and reinvest all earnings. This investment plan works
for you even if you invest only $1,000 annually. You can take it one step at a
time. Put time, money, and compounding to work.
[Graphic representation omitted. See Appendix #2.]
* This chart assumes that the subsequent annual investments are made on the last
day of each anniversary month. No method of investing can guarantee a profit or
protect against loss in down markets. However, by investing regularly over time
and buying shares at various prices, investors can purchase more shares at lower
prices. All accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing price
levels, the investor should consider whether or not to continue purchases
through periods of low price levels.
FEDERATED WORLD UTILITY FUND
(CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED WORLD UTILITY FUND (CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
World Utility Fund (Class A Shares) (the "Fund") from April 22, 1994 (start of
performance) to November 30, 1997 compared to Standard and Poor's 500 Index (S&P
500)+, FT Actuaries/S&P Global Utility Index (FTGUI)+ and the Lipper Utility
Funds Average (LPUFA).++ [Graphic representation omitted. See Appendix #3.] PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge =
$9,550) that was in effect prior to October 1, 1994. As of October 1, 1994, the
maximum sales charge was 5.50%. The Fund's performance assumes the reinvestment
of all dividends and distributions. The S&P 500, FTGUI and LPUFA have been
adjusted to reflect reinvestment of dividends on securities in the indices and
average.
** Total return quoted reflects all applicable sales charges and any applicable
contingent deferred sales charges.
+ The S&P 500 and the FTGUI are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The indices are unmanaged.
++ The LPUFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND
(CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED WORLD UTILITY FUND (CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
World Utility Fund (Class B Shares) (the "Fund") from July 27, 1995 (start of
performance) to November 30, 1997 compared to Standard and Poor's 500 Index (S&P
500)+, FT Actuaries/S&P Global Utility Index (FTGUI)+ and the Lipper Utility
Funds Average (LPUFA).++ [Graphic representation omitted. See Appendix #4.] PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 4.00% contingent deferred sales charge on any redemption
less than 3 years from the purchase date. The maximum contingent deferred sales
charge is 5.50% on any redemption less than 1 year from the purchase date. The
Fund's performance assumes the reinvestment of all dividends and distributions.
The S&P 500, FTGUI and LPUFA have been adjusted to reflect reinvestment of
dividends on securities in the indices and average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The S&P 500 and the FTGUI are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The indices are unmanaged.
++ The LPUFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND
(CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED WORLD UTILITY FUND (CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
World Utility Fund (Class C Shares) (the "Fund") from July 27, 1995 (start of
performance) to November 30, 1997 compared to Standard and Poor's 500 Index (S&P
500)+, FT Actuaries/S&P Global Utility Index (FTGUI)+ and the Lipper Utility
Funds Average (LPUFA).++ [Graphic representation omitted. See Appendix #5.] PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less than 1
year from the purchase date. The Fund's performance assumes the reinvestment of
all dividends and distributions. The S&P 500, FTGUI, and LPUFA have been
adjusted to reflect reinvestment of dividends on securities in the indices and
average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The S&P 500 and the FTGUI are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The indices are unmanaged.
++ The LPUFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND
(CLASS F SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED WORLD UTILITY FUND (CLASS F SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
World Utility Fund (Class F Shares) (the "Fund") from April 22, 1994 (start of
performance) to November 30, 1997 compared to Standard and Poor's 500 Index (S&P
500)+, FT Actuaries/S&P Global Utility Index (FTGUI)+ and the Lipper Utility
Funds Average (LPUFA).++ [Graphic representation omitted. See Appendix #6.] PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 1.00% ($10,000 investment minus $100 sales charge =
$9,900). The ending value of the Fund reflects a contingent deferred sales
charge of 1.00% on any redemption less than 4 years from the purchase date. The
Fund's performance assumes the reinvestment of all dividends and distributions.
The S&P 500, FTGUI and LPUFA have been adjusted to reflect reinvestment of
dividends on securities in the indices and average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The S&P 500 and the FTGUI are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The indices are unmanaged.
++ The LPUFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--87.2%
BANKING--1.0%
183,000 Suncorp-Metway Ltd. $ 477,353
CELLULAR TELEPHONE--7.8%
25,000 Advanced Information Service PLC 130,435
12,400 (a)Airtouch Communications, Inc. 486,700
39,000 (a)Grupo Iusacell S.A., ADR 814,125
8,300 OY Nokia AB, Class A, ADR 689,938
500,000 (a)Pilipino Telephone Corp. 55,079
214,000 Smartone Telecommunications 514,909
158,200 Vodafone Group PLC 1,058,049
Total 3,749,235
ENERGY MINERALS--2.6%
3,600 Elf Aquitaine SA 417,732
8,000 Repsol SA 346,053
14,100 YPF Sociedad Anonima, ADR 473,231
Total 1,237,016
FINANCE--2.1%
44,000 Commonwealth Installment Receipt Trustee Ltd. 521,318
69,500 (a)Legacy Hotels 485,502
Total 1,006,820
FOOD & BEVERAGE--0.6%
500,000 Darling Park Trust 266,312
FOREST PRODUCTS & PAPER--0.0%
260,000,000 (a)Texpar SA, Preference 2,340
MAJOR U.S. TELECOMMUNICATIONS--7.5%
17,500 AT&T Corp. 977,812
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
MAJOR U.S. TELECOMMUNICATIONS--CONTINUED
6,400 BellSouth Corp. $ 350,400
9,300 GTE Corp. 470,231
22,800 MCI Communications Corp. 1,001,775
11,117 SBC Communications, Inc. 809,457
Total 3,609,675
MULTI-INDUSTRY--1.5%
1,416 Viag AG 719,603
NATURAL GAS DISTRIBUTION--1.5%
11,500 Equitable Resources, Inc. 372,313
9,000 Pacific Enterprises 318,375
Total 690,688
OIL/GAS TRANSMISSION--4.3%
89,117 BG PLC 427,448
101,000 (a)Centrica PLC 146,698
11,565 Enron Corp. 448,144
15,000 Neste Oy 346,066
4,500 Sonat, Inc. 196,031
9,400 Williams Cos., Inc. (The) 502,313
Total 2,066,700
OTHER TELEPHONE/COMMUNICATIONS--6.8%
16,200 BCE, Inc. 490,202
2,400 (a)Bell Canada International, Inc. 34,795
120,000 (a)Cable & Wireless Communications PLC 533,017
8,200 Nortel Inversora SA 442,800
11,000 PT Telekomunikasi Indonesia, Class CS, ADR 160,875
33,800 (a)TELUS Corp. 726,142
8,000 Telefonos de Mexico, Class L, ADR 396,000
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
OTHER TELEPHONE/COMMUNICATIONS--CONTINUED
11,000 Telephone and Data System, Inc. $ 483,313
Total 3,267,144
REAL ESTATE--1.1%
13,938 Meditrust Corp. 529,644
SERVICES--0.5%
10,000 Nortel Inversora SA, Class B, ADR 247,500
TELECOMMUNICATIONS--2.8%
31,000 Mahanagar Telephone Nigam Ltd. 182,964
11,400 Portugal Telecom SA 525,083
161,000 (a)Telecom Italia SPA 634,658
Total 1,342,705
UTILITIES--47.3%
88,000 Australian Gas Light Co. 591,895
786,000 (a)(b)Beijing Datang Power 363,497
16,600 Boston Edison Co. 581,000
197,000 British Energy PLC 1,340,835
7,300 (a)CEZ A.S. 215,454
11,600 CMS Energy Corp. 456,750
175,000 Central Costanera S.A., Class B 446,413
20,347 (a)Chilgener S.A., ADR 508,675
10,700 Cinergy Corp. 381,188
13,100 Compania Anonima Nacional Telefonos de Venezuela, Class 517,450
D, ADR
17,800 DPL, Inc. 467,250
12,600 DQE, Inc. 418,163
14,517 Duke Energy Corp. 754,884
40,440 (a)Electricidade de Portugal SA 730,927
36,000 Empresa Nacional Electricidad SA, ADR 668,250
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
13,000 Endesa SA $ 244,551
28,000 Endesa SA, ADR 525,000
1,800 Evn Energie-Versorgung Niederoesterreich AG 232,080
7,300 FPL Group, Inc. 408,344
119,000 Hong Kong Electric Holdings Ltd. 402,552
300,000 Hong Kong and China Gas Co. Ltd. 539,436
22,900 Hyder PLC 365,486
200,000 (a)Lenenergo, ADR 136,000
19,000 Montana Power Co. 520,125
4,500 (b)Mosenergo, ADR 147,375
9,000 NIPSCO Industries, Inc. 421,313
93,000 National Grid Group PLC 461,779
16,700 National Power Co. PLC, ADR 627,294
11,700 New Century Energies, Inc. 517,725
72 Nippon Telegraph & Telephone Corp. 592,360
5,600 Oest Elektrizitats, Class A 448,560
21,000 P G & E Corp. 593,250
21,500 Pacificorp 501,219
10,000 Pinnacle West Capital Corp. 385,625
46,000 PowerGen PLC 593,936
17,700 Public Service Enterprises Group, Inc. 516,619
18,500 Puget Sound Energy, Inc. 511,063
19,200 SCANA Corp. 530,400
24,700 Severn Trent 390,252
19,700 Southern Co. 472,800
65,000 Southern Electric PLC 492,906
15,300 TECO Energy, Inc. 392,063
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
13,900 Texas Utilities Co. $ 556,000
875,000 (a)Thai Telephone & Telecom Public Co., Ltd. 110,870
37,500 Thames Water PLC 564,937
22,200 Tokyo Electric Power Co. 398,339
12,400 Unicom Corp. 361,150
17,000 (a)Westcoast Energy, Inc. 381,438
Total 22,785,478
TOTAL COMMON STOCKS (IDENTIFIED COST $35,376,545) 41,998,213
CONVERTIBLE SECURITIES--6.7%
BASIC INDUSTRY--1.7%
26,200 Coeur d'Alene Mines Corp., Conv. Pfd., $1.49 345,513
30,000,000 Kawasaki Steel Corp., Conv. Bond, 1.60%, 9/30/2004 220,490
4,100 Reynolds Metals Co. 233,444
Total 799,447
CELLULAR TELEPHONE--0.8%
6,700 Airtouch Communications, Inc., Conv. Pfd., Series C, 405,350
$2.13
ENERGY MINERALS--0.6%
5,000 (b)Tosco Corp., Conv. Pfd. 299,770
FINANCE--1.8%
20,000,000 Bank of Tokyo Cayman Finance Ltd., Conv. Bond, 4.25%, 175,122
3/31/2049
3,500 Merrill Lynch & Co., Inc., STRYPES, Series MGIC, $3.12 343,000
6,000 Salomon, Inc., DECS, Series CSN, $3.48 342,000
Total 860,122
NATURAL GAS DISTRIBUTION--1.0%
8,100 MCN Corp., PRIDES, $8.00 483,975
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
CONVERTIBLE SECURITIES--CONTINUED
UTILITIES--0.8%
8,000 (b)Nacional Financiera, SNC, PRIDES, $6.79 $ 384,000
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST 3,232,664
$3,005,521)
(C)REPURCHASE AGREEMENT--5.5%
$ 2,625,000 BT Securities Corp., 5.73%, dated 11/28/1997, due
12/1/1997
(AT AMORTIZED COST) 2,625,000
TOTAL INVESTMENTS (IDENTIFIED COST $41,007,066)(D) $ 47,855,877
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities amounted
to $1,194,642 which represents 2.5% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $41,007,932. The
net unrealized appreciation of investments on a federal tax basis amounts to
$6,847,945 which is comprised of $8,868,226 appreciation and $2,020,281
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($48,172,777) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR --American Depository Receipt
DECS --Dividend Enhanced Convertible Stock
PLC --Public Limited Company
PRIDES --Preferred Redeemable Increased Dividend Equity Securities
SA --Support Agreement
SPA --Standby Purchase Agreement
STRYPES --Structured Yield Product Exchangeable for Stock
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost
$41,007,066 and tax cost $41,007,932) $ 47,855,877
Cash 254,933
Income receivable 94,673
Receivable for shares sold 414,418
Deferred organizational costs 46,388
Deferred expenses 10,770
Total assets 48,677,059
LIABILITIES:
Payable for investments purchased $ 439,286
Payable for shares redeemed 15,038
Net payable for foreign currency exchange contracts purchased 545
Payable for taxes withheld 4,812
Accrued expenses 44,601
Total liabilities 504,282
NET ASSETS for 3,405,130 shares outstanding $ 48,172,777
NET ASSETS CONSIST OF:
Paid in capital $ 39,685,113
Net unrealized appreciation of investments and translation of assets and 6,848,633
liabilities in foreign currency
Accumulated net realized gain on investments and foreign currency transactions 1,529,256
Undistributed net investment income 109,775
Total Net Assets $ 48,172,777
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($20,393,835 / 1,440,164 shares outstanding) $14.16
Offering Price Per Share (100/94.50 of $14.16)* $14.98
Redemption Proceeds Per Share $14.16
CLASS B SHARES:
Net Asset Value Per Share ($15,176,917 / 1,074,553 shares outstanding) $14.12
Offering Price Per Share $14.12
Redemption Proceeds Per Share (94.5/100 of $14.12)** $13.34
CLASS C SHARES:
Net Asset Value Per Share ($1,923,181 / 136,019 shares outstanding) $14.14
Offering Price Per Share $14.14
Redemption Proceeds Per Share (99.00/100 of $14.14)** $14.00
CLASS F SHARES:
Net Asset Value Per Share ($10,678,844 / 754,394 shares outstanding) $14.16
Offering Price Per Share (100/99.00 of $14.16)* $14.30
Redemption Proceeds Per Share (99.00/100 of $14.16)** $14.02
</TABLE>
* See "Investing in the Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $63,418) $ 1,125,468
Interest (net of foreign taxes withheld of $402) 155,126
Total income 1,280,594
EXPENSES:
Investment advisory fee $ 360,983
Administrative personnel and services fee 215,000
Custodian fees 31,595
Transfer and dividend disbursing agent fees and expenses 95,598
Directors'/Trustees' fees 2,830
Auditing fees 17,794
Legal fees 5,297
Portfolio accounting fees 100,438
Distribution services fee--Class B Shares 66,779
Distribution services fee--Class C Shares 10,969
Distribution services fee--Class F Shares 23,607
Shareholder services fee--Class A Shares 40,723
Shareholder services fee--Class B Shares 22,260
Shareholder services fee--Class C Shares 3,656
Shareholder services fee--Class F Shares 23,607
Share registration costs 48,527
Printing and postage 38,246
Insurance premiums 3,790
Taxes 2,302
Miscellaneous 31,530
Total expenses 1,145,531
Waivers and reimbursements--
Waiver of investment advisory fee $ (358,968)
Waiver of distribution services fee--Class F Shares (23,607)
Reimbursement of other operating expenses (179,745)
Total waivers and reimbursements (562,320)
Net expenses 583,211
Net investment income 697,383
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions 1,504,300
Net change in unrealized appreciation of investments and translation
of assets and
liabilities in foreign currency 3,608,131
Net realized and unrealized gain on investments and foreign 5,112,431
currency transactions
Change in net assets resulting from operations $ 5,809,814
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 697,383 $ 806,966
Net realized gain on investments and foreign currency transactions ($1,527,842
and $1,104,981, respectively, as computed for federal tax purposes) 1,504,300 1,134,559
Net change in unrealized appreciation of investments and translation of assets
and liabilities in foreign currency 3,608,131 1,930,763
Change in net assets resulting from operations 5,809,814 3,872,288
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (428,963) (332,945)
Class B Shares (147,794) (59,524)
Class C Shares (27,610) (15,981)
Class F Shares (262,050) (221,379)
Distributions from net realized gains on investments and foreign
currency transactions
Class A Shares (426,071) --
Class B Shares (143,903) --
Class C Shares (35,982) --
Class F Shares (281,597) --
Change in net assets resulting from distributions to shareholders (1,753,970) (629,829)
SHARE TRANSACTIONS--
Proceeds from sale of shares 23,195,731 9,401,101
Net asset value of shares issued to shareholders in payment of
distributions declared 1,375,546 461,046
Cost of shares redeemed (6,684,566) (3,219,504)
Change in net assets resulting from share transactions 17,886,711 6,642,643
Change in net assets 21,942,555 9,885,102
NET ASSETS:
Beginning of period 26,230,222 16,345,120
End of period (including undistributed net investment income of $109,775 and
$302,518, respectively) $ 48,172,777 $ 26,230,222
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.69 $10.96 $ 9.67 $10.06
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28 0.43 0.42 0.24
Net realized and unrealized gain (loss)
on investments and foreign currency 2.00 1.67 1.27 (0.46)
Total from investment operations 2.28 2.10 1.69 (0.22)
LESS DISTRIBUTIONS
Distributions from net investment income (0.38) (0.37) (0.40) (0.17)
Distributions from net realized gain on
investments and foreign currency transactions (0.43) -- -- --
Total distributions (0.81) (0.37) (0.40) (0.17)
NET ASSET VALUE, END OF PERIOD $14.16 $12.69 $10.96 $9.67
TOTAL RETURN(B) 19.08% 19.54% 17.94% (3.00%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.40% 1.05% 0.25% 0.25%*
Net investment income 2.16% 3.87% 4.39% 5.10%*
Expense waiver/reimbursement(c) 1.49% 3.11% 4.78% 4.43%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $20,394 $12,671 $8,875 $4,948
Average commission rate paid(d) $0.0004 $0.0001 -- --
Portfolio turnover 52% 50% 46% 7%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 22, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start of
business, March 17, 1994, to April 21, 1994, Class A had no public investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the periods ended November 30, 1995 and 1994, the adviser waived all of
its investment advisory fee, 1.00% and 1.00%, respectively, and reimbursed other
operating expenses, 0.34% and 0.86%, respectively, to comply with certain state
expense limitations. The remainder of the reimbursement was voluntary. This
expense decrease is reflected in both the expenses and net investment income
ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.68 $10.95 $10.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.21 0.35 0.11
Net realized and unrealized gain on investments and
foreign currency 1.95 1.67 0.41
Total from investment operations 2.16 2.02 0.52
LESS DISTRIBUTIONS
Distributions from net investment income (0.29) (0.29) (0.10)
Distributions from net realized gain on investments and
foreign currency transactions (0.43) -- --
Total distributions (0.72) (0.29) (0.10)
NET ASSET VALUE, END OF PERIOD $14.12 $12.68 $10.95
TOTAL RETURN(B) 18.04% 18.79% 5.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.15% 1.80% 1.00%*
Net investment income 1.36% 3.18% 2.99%*
Expense waiver/reimbursement(c) 1.49% 3.11% 4.78%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $15,177 $4,091 $1,068
Average commission rate paid(d) $0.0004 $0.0001 --
Portfolio turnover 52% 50% 46%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 27, 1995 (date of initial
public investment) to November 30, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the period ended November 30, 1995, the adviser waived all of its
advisory fee, 1.00%, and reimbursed other operating expenses, 0.34%, to comply
with certain state expense limitations. The remainder of the reimbursement was
voluntary. This expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.67 $10.95 $10.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.19 0.33 0.15
Net realized and unrealized gain on investments and
foreign currency 2.00 1.68 0.37
Total from investment operations 2.19 2.01 0.52
LESS DISTRIBUTIONS
Distributions from net investment income (0.29) (0.29) (0.10)
Distributions from net realized gain on investments and
foreign currency transactions (0.43) -- --
Total distributions (0.72) (0.29) (0.10)
NET ASSET VALUE, END OF PERIOD $14.14 $12.67 $10.95
TOTAL RETURN(B) 18.24% 18.61% 4.92%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.15% 1.80% 1.00%*
Net investment income 1.39% 3.17% 3.03%*
Expense waiver/reimbursement(c) 1.49% 3.11% 4.77%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,923 $1,072 $374
Average commission rate paid(d) $0.0004 $0.0001 --
Portfolio turnover 52% 50% 46%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 27, 1995 (date of initial
public investment) to November 30, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the period ended November 30, 1995, the adviser waived all of its
investment advisory fee, 1.00%, and reimbursed other operating expenses, 0.34%,
to comply with certain state expense limitations. The remainder of the
reimbursement was voluntary. The expense decrease is reflected in both the
expense and net investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS--CLASS F SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.70 $10.96 $ 9.66 $10.04
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.29 0.43 0.43 0.21
Net realized and unrealized gain (loss) on
investments and foreign currency 1.98 1.67 1.25 (0.43)
Total from investment operations 2.27 2.10 1.68 (0.22)
LESS DISTRIBUTIONS
Distributions from net investment income (0.38) (0.36) (0.38) (0.16)
Distributions from net realized gain on
investments and foreign currency transactions (0.43) -- -- --
Total distributions (0.81) (0.36) (0.38) (0.16)
NET ASSET VALUE, END OF PERIOD $14.16 $12.70 $10.96 $ 9.66
TOTAL RETURN(B) 18.99% 19.55% 17.79% (3.07%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.40% 1.07% 0.50% 0.50%*
Net investment income 2.17% 3.87% 4.19% 4.59%*
Expense waiver/reimbursement(c) 1.74% 3.34% 4.78% 4.43%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $10,679 $8,396 $6,028 $4,821
Average commission rate paid(d) $0.0004 $0.0001 -- --
Portfolio turnover 52% 50% 46% 7%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 22, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start of
business, March 28, 1994 to April 21, 1994, Class F Shares had no public
investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the periods ended November 30, 1995, and 1994, the adviser waived all of
its investment advisory fee, 1.00% and 1.00%, respectively, and reimbursed other
operating expenses, 0.34% and 0.86%, respectively, to comply with certain state
expense limitations. The remainder of the reimbursement was voluntary. This
expense decrease is reflected in both the expenses and net investment income
ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. ORGANIZATION
World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of eight portfolios. The
financial statements included herein are only those of Federated World Utility
Fund (the "Fund"), a diversified portfolio. The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held.
The Fund offers four classes of shares: Class A Shares, Class B Shares, Class C
Shares, and Class F Shares. The Fund's investment objective is to provide total
return.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS-- Market values of the Fund's foreign and domestic equity
securities are determined according to the last reported sale price on a
recognized securities exchange, if available. If unavailable, or if the
securities trade over the counter, the securities are generally valued according
to the mean between the last closing bid and asked prices. Short-term foreign
and domestic securities are valued at the prices provided by an independent
pricing service. However, short-term foreign and domestic securities with
remaining maturities of 60 days or less at the time of purchase may be valued at
amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS-- It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors ("the Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS-- Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions. The following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
UNDISTRIBUTED
NET INVESTMENT
INCOME/ACCUMULATED
ACCUMULATED DISTRIBUTIONS IN
NET REALIZED EXCESS OF NET
GAIN/LOSS INVESTMENT INCOME
$23,709 $(23,709)
FEDERAL TAXES-- It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
DEFERRED EXPENSES-- The costs incurred by the Fund with respect to registration
of its shares in its first fiscal year, excluding the initial expense of
registering its shares, have been deferred and are being amortized over a period
not to exceed five years from the Fund's commencement date.
FOREIGN EXCHANGE CONTRACTS-- The Fund may enter into foreign currency exchange
contracts as a way of managing foreign exchange risk. The Fund may enter into
these contracts for the purchase or sale of a specific foreign currency at a
fixed price on a future date as a hedge or cross hedge against either specific
transactions or portfolio positions. The objective of the Fund's foreign
currency hedging transactions is to reduce the risk that the U.S. dollar value
of the Fund's foreign currency denominated securities will decline in value due
to changes in foreign currency exchange rates. All foreign currency contracts
are "marked to market" daily at the applicable translation rates resulting in
unrealized gains and losses. Realized gains or losses are recorded at the time
the foreign currency exchange contracts is offset by entering into a closing
transaction or by the delivery or receipt of the currency. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar.
At November 30, 1997, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
DATE DELIVER FOR AT VALUE (DEPRECIATION)
CONTRACTS PURCHASED:
<S> <C> <C> <C> <C>
12/10/1997 1,870 Brazilian Real $ 1,685 $ 1,686 $ 1
12/1/1997 259,970 Pound Sterling 439,609 439,063 (546)
<CAPTION>
CONTRACTS SOLD:
12/10/1997 9 Brazilian Real $ 8 $ 8 --
</TABLE>
Net Unrealized Depreciation on Foreign Currency Contracts $ (545)
FOREIGN CURRENCY TRANSLATION-- The accounting records of the Fund are maintained
in U.S. dollars. All assets and liabilities denominated in foreign currencies
("FC") are translated into U.S. dollars based on the rate of exchange of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expenses are translated at the rate of exchange quoted on
the respective date that such transactions are recorded. Differences between
income and expense amounts recorded and collected or paid are adjusted when
reported by the custodian bank. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
RESTRICTED SECURITIES-- Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions exempt
from such registration. In some cases, the issuer of restricted securities has
agreed to register such securities for resale, at the issuer's expense either
upon demand by the Fund or in connection with another registered offering of the
securities. Many restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may be
determined to be liquid under criteria established by the Directors. The Fund
will not incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the secondary market
or, if no market prices are available, at the fair value as determined by the
Fund's pricing committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Beijing Datang Power 9/15/1997 - 9/16/1997 $ 448,504
Monsenergo, ADR 1/24/1997 - 5/27/1997 200,725
Nacional Financiera, SNC, PRIDES, $6.79 12/22/1994 - 11/3/1995 273,805
Tosco Corp., Conv. Pfd. 12/10/1996 - 12/18/1996 250,788
</TABLE>
USE OF ESTIMATES-- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ from
those estimated.
OTHER-- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1997, par value shares ($0.001 per share) authorized were as
follows:
SHARES OF PAR
VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Class F Shares 135,000,000
Total 540,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1997 1996
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 581,128 $ 7,762,055 338,469 $ 3,933,948
Shares issued to shareholders in payment of
distributions declared 57,861 713,508 23,491 269,640
Shares redeemed (197,035) (2,611,952) (173,419) (2,031,192)
Net change resulting from Class A Share
transactions 441,954 $ 5,863,611 188,541 $ 2,172,396
<CAPTION>
YEAR ENDED NOVEMBER 30,
1997 1996
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 805,836 $ 10,848,367 249,058 $ 2,890,530
Shares issued to shareholders in payment of
distributions declared 21,079 261,160 4,171 48,165
Shares redeemed (75,123) (1,012,880) (27,954) (330,601)
Net change resulting from Class B Share
transactions 751,792 $ 10,096,647 225,275 $ 2,608,094
<CAPTION>
YEAR ENDED NOVEMBER 30,
1997 1996
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 124,345 $ 1,651,834 54,907 $ 642,653
Shares issued to shareholders in payment of
distributions declared 2,360 29,266 368 4,254
Shares redeemed (75,267) (987,566) (4,827) (57,104)
Net change resulting from Class C Share
transactions 51,438 $ 693,534 50,448 $ 589,803
<CAPTION>
YEAR ENDED NOVEMBER 30,
1997 1996
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 219,510 $ 2,933,475 167,886 $ 1,933,970
Shares issued to shareholders in payment of
distributions declared 30,233 371,612 12,102 138,987
Shares redeemed (156,735) (2,072,168) (68,696) (800,607)
Net change resulting from Class F Share
transactions 93,008 $ 1,232,919 111,292 $ 1,272,350
Net change resulting from share
transactions 1,338,192 $ 17,886,711 575,556 $ 6,642,643
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-- Federated Global Research Corp., the Fund's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to 1.00% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion
ADMINISTRATIVE FEE-- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE-- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp., the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Corporation's Class B Shares, Class C Shares, and Class F Shares. The
Plan provides that the Fund may incur distribution expenses according to the
following schedule annually, to compensate Federated Securities Corp.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class B Shares 0.75%
Class C Shares 0.75%
Class F Shares 0.25%
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE-- Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services, the Fund will pay Federated Shareholder
Services up to 0.25% of average daily net assets of the Fund shares for the
period. The fee paid to Federated Shareholder Services is used to finance
certain services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-- Fserv, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES-- FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES-- Organizational expenses of $75,061 and start-up
administrative expenses of $39,069 were borne initially by Administrator. The
Fund has reimbursed the Adviser for these expenses. These have been deferred and
are being amortized over the five-year period following the Fund's effective
date. For the year ended November 30, 1997, the Fund expensed $19,354 and $9,767
pursuant to this agreement.
GENERAL-- Certain Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $32,925,109
SALES $17,610,596
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of countries was as follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Argentina 3.3%
Australia 3.9
Austria 1.4
Brazil 0.0
Canada 4.4
Chile 2.4
Czech Republic 0.4
Finland 2.2
France 0.9
Germany 1.5
Hong Kong 3.8
India 0.4
Indonesia 0.3
Italy 1.3
Japan 2.9
Mexico 3.3
Phillipines 0.1
Portugal 2.6
Russia 0.6
Spain 2.3
Thailand 0.5
United Kingdom 14.5
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Directors and Shareholders of WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated World Utility Fund (a portfolio of
World Investment Series, Inc.) as of November 30, 1997, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated World Utility Fund of World Investment Series, Inc. at November 30,
1997, and the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 20, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 981487309
Cusip 981487408
Cusip 981487101
Cusip 981487200
G00259-06 (1/98)
[Graphic]
[Graphic]
[Graphic]Federated Investors
Federated Asia Pacific Growth Fund
2ND ANNUAL REPORT
NOVEMBER 30, 1997
ESTABLISHED 1996
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
I am pleased to present the second Annual Report of Federated Asia Pacific
Growth Fund. This report combines information about the fund's 12-month fiscal
year period from December 1, 1996 through November 30, 1997.
The report begins with a commentary by the fund's portfolio manager, Alexandre
de Bethmann, Vice President of Federated Global Research Corp., covering
international economic and market conditions and fund strategy. Following his
commentary is a complete list of the fund's investments and the financial
statements.
Federated Asia Pacific Growth Fund is managed to bring you significant long-term
opportunities from an extremely well-researched portfolio of many large- and
small-company stocks in Asia and the Pacific Rim countries.* At the end of the
reporting period, the fund's $11 million in assets was invested in over 80
stocks across 8 countries.
In the fund's last report that covered the first half of its fiscal year, I
noted that, while the fund's performance has been positive in a negative market,
there will inevitably be periods of unfriendly volatility. The inevitable
occurred in the second half of the fund's fiscal year, as the Asian economies
experienced an extremely difficult period of economic turmoil. In this
environment, the stock markets of this region recorded highly negative
performance. The fund's performance is shown below. While the fund's total
return was less negative than the overall market and the average Asian Pacific
fund, the net asset value was nevertheless heavily impacted by negative
developments that swept the region.**
TOTAL RETURN NET ASSET VALUE MOVEMENT Class A Shares (23.80%)
$10.25 to $7.81 = (24%) Class B Shares (24.14%) $10.19 to $7.73 = (24%) Class C
Shares (24.12%) $10.20 to $7.74 = (24%)
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the 12-month reporting period based on
offering price for Class A, B, and C Shares were (28.02%), (28.36%), and
(24.90%), respectively.
Thank you for your patience during what has been a trying time for investors in
the Asian Pacific region. Please be assured that the experienced professionals
at Federated Global Research Corp. are thoroughly focused on the region on a
day-to-day basis--and on making the prudent decisions that can ultimately reward
your patience.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1998
INVESTMENT REVIEW
[Graphic]
Alexandre de Bethmann
Vice President
Federated Global Research Corp.
[Graphic]
THIS WAS A YEAR WHEN THE RESOLVE OF INVESTORS IN THE ASIA PACIFIC REGION WERE
SEVERELY TESTED, PARTICULARLY LATER IN THE REPORTING PERIOD. WHAT ARE YOUR
COMMENTS ON THE ECONOMIC DIFFICULTIES IN THE REGION?
Earlier this year, slowing economic growth and trade deficit in Thailand brought
down its currency and the stock market. The crisis spread to other Asian
countries, causing their currencies and stock markets to decline as well. Flight
of foreign capital aggravated the downward spiral.
The devaluation revealed a common problem in many Asian countries: a weak
banking system and a massive inflow of foreign capital. Loose credit policy has
led to over investment and poor returns on capital. Large-scale borrowing by
banks and corporations from abroad has created a mismatch of liability and
assets. When the currencies devalued, their dollar debt doubled and tripled in
local currencies, leading to a debt crisis. Companies experienced severe
financial difficulties.
[Graphic]
IN THIS DIFFICULT ENVIRONMENT, HOW DID FEDERATED ASIA PACIFIC GROWTH FUND
PERFORM COMPARED TO ITS BENCHMARK?
The fund's returns were consistent with, and slightly less negative than, the
(26.83%) total return of the market as measured by the fund's benchmark, the
Morgan Stanley Capital International Combined Asia Pacific Index.* The 12-month
total return for Class A Shares was (23.80%) based on net asset value. The total
returns for Class B Shares and Class C Shares based on net asset value were
(24.14%) and (24.12%), respectively.** The fund's returns were also slightly
less negative than the (25.48%) average total return of 41 Pacific region funds
tracked by Lipper Analytical Services, Inc.+
* The Morgan Stanley Capital International Combined Asia Pacific Index is a
market value-weighted average of the performance of securities listed on the
stock exchange of 13 countries in the Pacific and Asian regions. This index is
unmanaged, and investments cannot be made in an index.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the 12-month reporting period based on
offering price for Class A, B, and C Shares were (28.02%), (28.36%), and
(24.90%), respectively.
+ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services as falling into the
respective categories indicated. These figures do not reflect sales charges.
[Graphic]
WHAT WAS YOUR STRATEGY FOR SUCH A DIFFICULT MARKET?
Stock selection in strong companies was, and continues to be, our key strategy.
We focused on companies with non-cyclical revenues, with solid balance sheets
and quality management. To offset the weakening currencies, we focused on
exporters with dollar-denominated revenues. An example is AIWA, a subsidiary of
Sony. With 70% of its manufacturing in Asia and 70% of sales to the U.S. and
Europe, Aiwa is a beneficiary of the currency devaluation in Asia.
On an asset allocation basis, our overweight positions in Australia and
underweight position in Thailand, Malaysia, Indonesia, the Philippines, and
Korea have helped.
[Graphic]
HOW WAS THE FUND'S $11 MILLION PORTFOLIO ALLOCATED BY COUNTRY AT THE END OF THE
REPORTING PERIOD, AND WHAT WERE THE FUND'S TOP TEN HOLDINGS?
As of November 30, 1997, the country allocations were:
COUNTRY ALLOCATION
Japan (developed) 53.33%
Hong Kong (developed) 20.19
Australia (developed) 11.81
Singapore (developed) 4.49
China (emerging) 2.55
Indonesia (emerging) 1.56
Korea (emerging) 0.92
New Zealand (developed) 0.78
The fund's top 10 holdings as of November 30, 1997 were:
TOP HOLDINGS PERCENTAGE
SECURITY NAME COUNTRY OF NET ASSETS INDUSTRY
Nintendo Corp. Ltd. Japan 3.62% Recreation, Other
Consumer Goods
HSBC Holdings PLC Hong Kong 2.28 Banking
New World Development
Co. Ltd. Hong Kong 2.27 Real Estate
Sony Corp. Japan 2.24 Electrical &
Electronics
Namco Japan 2.24 Leisure & Tourism
Sankyo Co. Ltd. Japan 2.24 Health &
Personal Care
Cheung Kong Hong Kong 2.22 Real Estate
Fuji Photo Film Co. Japan 2.21 Recreation, Other
Consumer Goods
Hutchison Whampoa Hong Kong 2.10 Multi-Industry
Shokoh Fund & Co. Japan 1.99 Financial Services
TOTAL PERCENTAGE OF NET ASSETS 23.41%
[Graphic]
AS WE BEGIN A NEW YEAR, WHAT INITIATIVES ARE UNDERWAY TO STABILIZE THE ASIA
PACIFIC REGION?
The involvement of the International Monetary Fund (IMF) in solving the current
Asian financial crisis is highly important. The short-term emergency loans from
the IMF to the distressed Asian economies provide temporary relief short-term
and build a timely bridge to assist them in long-term recovery. In addition,
lenders in the developed countries are considering plans to roll-over their
short-term loans. Therefore, it is unlikely that the region will default.
[Graphic]
WHAT IS THE IMPLICATION OF THESE MEASURES?
The IMF's rescue packages play a critical role not only in easing the short-term
pain in liquidity for the region, but also in introducing reforms and
restructuring of these countries' distraught financial systems. The requirements
that come with these remedies will bring a long-lasting effect by reducing the
region's Gross Domestic Product growth to a more reasonable pace, restructuring
the banking system, and opening the region's financial markets. All these
measures are essential and beneficial to the region's long-term recovery.
In the meantime, the severity of the current crisis has finally brought the
region's policy makers closer to reality. The unprecedented decline in major
financial markets and the potential of induced political downfall have made
these leaders come out of the denial stage, admit their past mistakes and
current problems, and start asking for outside help. They are also beginning to
negotiate new short-term loans and outstanding loan roll-overs to solve the
liquidity problems.
[Graphic]
IS IT, THEN, TIME TO ACCUMULATE POSITIONS IN THESE MARKETS?
Pessimism surrounds the Asian markets at the moment, but the darkest time is
often the turning point of any adverse situation. Long-term valuation in a
stabilized environment in some depressed markets have become extremely
compelling. Recently, we have seen more and more savvy global investors
returning to the market, a phenomenon that may help restore confidence in the
region.
Ultimately, international investing is by nature long-term investing. And the
longer term prospect is bright for the region; the near term does require
caution and may remain volatile. But the patient investor could be well-rewarded
in two or three years.
FEDERATED ASIA PACIFIC GROWTH FUND
(CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED ASIA PACIFIC GROWTH FUND (CLASS A
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
Asia Pacific Growth Fund (Class A Shares) (the "Fund") from February 28, 1996
(start of performance) to November 30, 1997, compared to the Morgan Stanley
Capital International Asia Pacific Index (MSEUCAP).+
"Graphic representation "7" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge
= $9,450). The Fund's performance assumes the reinvestment of all dividends
and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSEUCAP is a market value-weighted average of the performance of
securities listed on the stock exchanges of 14 countries in the Pacific and
Asian regions. The MSEUCAP is not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The MSEUCAP has not been adjusted to
reflect reinvestment of dividends on securities in the index. The index is
unmanaged.
FEDERATED ASIA PACIFIC GROWTH FUND
(CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED ASIA PACIFIC GROWTH FUND (CLASS B
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
Asia Pacific Growth Fund (Class B Shares) (the "Fund") from February 28, 1996
(start of performance) to November 30, 1997, compared to the Morgan Stanley
Capital International Asia Pacific Index (MSEUCAP).+
"Graphic representation "8" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 4.75% on any
redemption less than 2 years from the purchase date. The maximum contingent
deferred sales charge is 5.50% on any redemption less than 1 year from the
purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSEUCAP is a market value-weighted average of the performance of
securities listed on the stock exchanges of 14 countries in the Pacific and
Asian regions. The MSEUCAP is not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The MSEUCAP has not been adjusted to
reflect reinvestment of dividends on securities in the index. The index is
unmanaged.
FEDERATED ASIA PACIFIC GROWTH FUND
(CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED ASIA PACIFIC GROWTH FUND (CLASS C
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
Asia Pacific Growth Fund (Class C Shares) (the "Fund") from February 28, 1996
(start of performance) to November 30, 1997, compared to the Morgan Stanley
Capital International Asia Pacific Index (MSEUCAP).+
"Graphic representation "9" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 1.00% on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSEUCAP is a market value-weighted average of the performance of
securities listed on the stock exchanges of 14 countries in the Pacific and
Asian regions. The MSEUCAP is not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The MSEUCAP has not been adjusted to
reflect reinvestment of dividends on securities in the index. The index is
unmanaged.
FEDERATED ASIA PACIFIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--95.6%
APPLIANCES & HOUSEHOLD DURABLES--0.5%
1,560 (a)Samsung Electronics Co. $ 57,567
AUTOMOBILE--5.7%
6,000 Honda Motor Co. Ltd. 217,199
59,000 (a)Mazda Motor Corp. 165,038
86,000 PT Astra International 44,798
318,000 (a)Qingling Motors Co., Class H 169,689
16,000 Singapore Technologies Automotive Ltd. 52,689
Total 649,413
BANKING--6.3%
22,000 Australia & New Zealand Banking Group, Melbourne 150,828
10,800 HSBC Holdings PLC 260,559
334 PT Modernbank 30
8,000 Shinki Co. Ltd. 131,636
14,000 Sumitomo Bank Ltd., Osaka 177,708
Total 720,761
BROADCASTING & PUBLISHING--2.8%
34,600 (a)News Corp., Ltd. 184,760
2,000 Nippon Broadcasting System 100,294
2,000 Singapore Press Holdings Ltd. 27,348
Total 312,402
CHEMICALS--0.8%
420,000 (a)Beijing Yanhua Petrochemical Co. Ltd., Class H 88,560
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
DATA PROCESSING & REPRODUCTION--3.2%
19,000 Fujitsu Ltd. $ 212,889
5,000 Meitec Corp. 154,750
Total 367,639
ELECTRICAL & ELECTRONICS--12.0%
8,000 Aiwa Co. Ltd. 190,558
400 Canon Copier Sales Co. 2,194
3,500 Fujimi, Inc. 150,833
19,000 Hitachi Ltd. 134,731
15,000 Japan Radio Co. 111,890
4,000 Mabuchi Motor Co. 209,677
26,000 Olympus Optical Co. 190,276
3,000 Sony Corp. 256,219
13,000 Ushio Inc. 127,326
Total 1,373,704
ELECTRONIC COMPONENTS, INSTRUMENTS--3.5%
3,600 (a)Creative Technology Ltd. 95,850
7,000 Hitachi Maxell 156,866
38,000 VTech Holdings Ltd. 102,984
32,000 (a)Wong's Circuits Holdings Ltd. 44,800
Total 400,500
ENERGY - OIL & GAS--1.6%
582,000 (a)Cue Energy Resources NL 53,651
66,900 Oil Search Ltd. 132,023
Total 185,674
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
ENERGY SOURCES--1.0%
16,500 Woodside Petroleum Ltd. $ 118,293
FINANCIAL SERVICES--9.1%
2,000 (a)Aiful Corp. 133,830
41,900 Austrim Ltd. 93,273
10,000 Nomura Securities Co. Ltd. 123,800
611,000 PT Lippo Securities 50,254
136,000 Peregrine Investment 133,708
136,000 Premier Investments Ltd. 153,231
800 Shohkoh Fund & Co. 227,542
2,600 Takefuji 119,788
Total 1,035,426
FOOD & HOUSEHOLD PRODUCTS--1.4%
31,800 Coles Myer Limited 156,345
HEALTH & PERSONAL CARE--4.2%
8,000 Sankyo Co. Ltd. 255,122
16,000 (b)Shanghai Industrial Holdings Ltd. 50,503
11,000 Terumo Corp. 172,380
Total 478,005
INDUSTRIAL COMPONENTS--0.4%
10,470 Daewoo Heavy Industries 47,807
LEISURE & TOURISM--3.1%
8,000 Namco 255,749
4,800 People Co. Ltd. 100,043
Total 355,792
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
MACHINERY & ENGINEERING--0.9%
70,000 Natsteel Broadway Ltd. $ 102,550
MERCHANDISING--2.2%
66,000 China EB-IHD Holdings Ltd. 55,923
2,000 Ito-Yokado Co., Ltd. 90,265
120 Iuchi Seiedo Co. Ltd. 2,633
13,000 Laox 101,861
Total 250,682
METALS - STEEL--1.0%
458,000 (a)Angang New Steel Co. Ltd. 72,282
49,000 Lung Kee Metal Holdings Ltd. 47,530
Total 119,812
MINING--0.8%
23,000 (a)Sumitomo Metal Mng. 91,549
MISCELLANEOUS MATERIALS & COMMODITIES--1.6%
3,600 Circle K Japan Co. Ltd. 180,811
400 Sanyo Pax Co., Ltd. 4,012
Total 184,823
MULTI-INDUSTRY--6.2%
56,000 Citic Pacific Ltd. 223,122
36,000 Hutchison Whampoa 239,836
32,000 Mitsui & Co. 222,402
13,000 Wing Tai Holdings, Ltd 16,716
Total 702,076
</TABLE>
<TABLE>
<CAPTION>
FEDERATED ASIA PACIFIC GROWTH FUND VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
REAL ESTATE--10.9%
36,000 (a)Cheung Kong $ 253,807
68,000 China Resources Enterprises Ltd. 146,463
776,000 Lippo China Resources Ltd. 156,599
15,000 Mitsubishi Estate Co. Ltd. 173,947
70,000 (a)New World Development Co. Ltd. 259,434
29,000 Sumitomo Reality & Dev. 194,280
30,000 Tokyu Land Corp. 59,706
Total 1,244,236
RECREATION, OTHER CONSUMER GOODS--5.8%
7,000 Fuji Photo Film Co. 251,753
4,000 Nintendo Corp. Ltd. 413,712
Total 665,465
TELECOMMUNICATIONS--5.4%
93,700 AAPT Telecommunications 147,801
20,000 (a)China Telecommunications 33,375
170,000 Keppel Telecom & Transport 124,761
27 Nippon Telegraph & Telephone Corp. 222,135
16,000 PT Indosat 36,299
64,000 PT Telekomunikasi Indonesia 46,936
Total 611,307
TRANSPORTATION - AIRLINES--0.8%
44,000 Air New Zealand Ltd., Class B 89,581
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
UTILITIES - ELECTRICAL & GAS--4.4%
34,000 China Light and Power Co. Ltd. $ 171,533
99,000 Hong Kong and China Gas Co. Ltd. 178,014
52,000 Novus Petroleum Ltd. 158,012
Total 507,559
TOTAL COMMON STOCKS (IDENTIFIED COST $12,470,567) 10,917,528
(C)REPURCHASE AGREEMENT--5.6%
$ 635,000 BT Securities Corp., 5.73%, dated 11/28/1997, due
12/1/1997 (AT AMORTIZED COST) 635,000
TOTAL INVESTMENTS (IDENTIFIED COST $13,105,567)(D) $ 11,552,528
</TABLE>
(a) Non-income-producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $50,503 which represents 0.4% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $13,118,219. The
net unrealized depreciation of investments on a federal tax basis amounts to
$1,565,691 which is comprised of $248,483 appreciation and $1,814,174
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($11,414,111) at November 30, 1997.
The following acronym is used throughout this portfolio:
PLC --Public Limited Company
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $13,105,567 and tax cost $ 11,552,528
$13,118,219)
Cash denominated in foreign currencies (at identified cost $9,465) 9,483
Income receivable 12,354
Receivable for investments sold 47,293
Receivable for shares sold 114,245
Deferred organizational costs 39,671
Total assets 11,775,574
LIABILITIES:
Payable for investments purchased $312,843
Payable for shares redeemed 8,284
Payable to Bank 18,180
Payable for taxes withheld 1,870
Accrued expenses 20,286
Total liabilities 361,463
NET ASSETS for 1,467,040 shares outstanding $ 11,414,111
NET ASSETS CONSIST OF:
Paid in capital $ 14,718,693
Net unrealized depreciation of investments and translation of assets and liabilities in (1,553,701)
foreign currency
Accumulated net realized loss on investments and foreign currency transactions (1,742,587)
Net operating loss (8,294)
Total Net Assets $ 11,414,111
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($7,297,248 / 934,555 shares outstanding) $7.81
Offering Price Per Share (100/94.50 of $7.81)* $8.26
Redemption Proceeds Per Share $7.81
CLASS B SHARES:
Net Asset Value Per Share ($3,606,125 / 466,458 shares outstanding) $7.73
Offering Price Per Share $7.73
Redemption Proceeds Per Share (94.50/100 of $7.73)** $7.30
CLASS C SHARES:
Net Asset Value Per Share ($510,738 / 66,027 shares outstanding) $7.74
Offering Price Per Share $7.74
Redemption Proceeds Per Share (99.00/100 of $7.74)** $7.66
</TABLE>
* See "Investing in the Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $ 77,489
$9,102)
Interest (net of foreign taxes withheld of $34) 44,753
Total income 122,242
EXPENSES:
Investment advisory fee $ 100,152
Administrative personnel and services fee 185,000
Custodian fees 39,634
Transfer and dividend disbursing agent fees and 4,162
expenses
Directors'/Trustees' fees 1,834
Auditing fees 7,794
Legal fees 4,671
Portfolio accounting fees 85,718
Distribution services fee--Class B Shares 25,716
Distribution services fee--Class C Shares 3,848
Shareholder services fee--Class A Shares 12,907
Shareholder services fee--Class B Shares 8,572
Shareholder services fee--Class C Shares 1,282
Share registration costs 27,056
Printing and postage 33,551
Insurance premiums 3,218
Taxes 395
Miscellaneous 7,447
Total expenses 632,957
Waivers and reimbursements--
Waiver of investment advisory fee $ (100,152)
Reimbursement of other operating expenses (334,402)
Total waivers and reimbursements (434,554)
Net expenses 198,403
Net operating loss (76,161)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments and foreign
currency transactions
(net of foreign taxes withheld of $285) (1,806,239)
Net change in unrealized depreciation of
investments and
translation of assets and liabilities in foreign (1,681,791)
currency
Net realized and unrealized loss on (3,488,030)
investments and foreign currency transactions
Change in net assets resulting from $ (3,564,191)
operations
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net operating loss $ (76,161) $ (9,521)
Net realized gain (loss) on investments and foreign currency
transactions ($(1,738,228) and $3,404, respectively,
as computed for federal tax purposes) (1,806,239) (18,571)
Net change in unrealized appreciation/(depreciation) of
investments and translation of assets and liabilities in
foreign currency (1,681,791) 128,090
Change in net assets resulting from operations (3,564,191) 99,998
SHARE TRANSACTIONS--
Proceeds from sale of shares 21,112,630 14,841,199
Cost of shares redeemed (13,396,404) (7,679,121)
Change in net assets resulting from share transactions 7,716,226 7,162,078
Change in net assets 4,152,035 7,262,076
NET ASSETS:
Beginning of period 7,262,076 --
End of period $ 11,414,111 $ 7,262,076
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.25 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.03) 0.00
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (2.41) 0.25
Total from investment operations (2.44) 0.25
NET ASSET VALUE, END OF PERIOD $ 7.81 $10.25
TOTAL RETURN(B) (23.80%) 2.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.85% 1.85%*
Net operating loss (0.53%) --
Expense waiver/reimbursement(c) 4.77% 7.02%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $7,297 $4,593
Average commission rate paid(d) $0.0098 $0.0039
Portfolio turnover 193% 99%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.19 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.08) (0.03)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (2.38) 0.22
Total from investment operations (2.46) 0.19
NET ASSET VALUE, END OF PERIOD $ 7.73 $10.19
TOTAL RETURN(B) (24.14%) 1.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60% 2.60%*
Net operating loss (1.25%) (0.86%)*
Expense waiver/reimbursement(c) 4.77% 7.02%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $3,606 $2,273
Average commission rate paid(d) $0.0098 $0.0039
Portfolio turnover 193% 99%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) November 30, 1996
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.20 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.12) (0.05)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (2.34) 0.25
Total from investment operations (2.46) 0.20
NET ASSET VALUE, END OF PERIOD $ 7.74 $10.20
TOTAL RETURN(B) (24.12%) 2.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60% 2.60%*
Net operating loss (1.22%) (0.90%)*
Expense waiver/reimbursement(c) 4.77% 7.02%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $511 $397
Average commission rate paid(d) $0.0098 $0.0039
Portfolio turnover 193% 99%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. ORGANIZATION
World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of eight portfolios. The
financial statements included herein are only those of Federated Asia Pacific
Growth Fund (the "Fund"), a diversified portfolio. The financial statements of
the other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The Fund offers three classes of shares: Class A Shares, Class
B Shares, and Class C Shares. The investment objective of the fund is to provide
long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS --Foreign and domestic equity securities are valued at
the last sale price reported on a national securities exchange or
over-the-counter market. In the absence of recorded sales for equity
securities, they are valued according to the mean between the last closing bid
and asked prices. Short-term foreign and domestic securities are valued at the
prices provided by an independent pricing service. However, short-term foreign
and domestic securities with remaining maturities of 60 days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value.
REPURCHASE AGREEMENTS --It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS --Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions and net operating losses. The following
reclassifications have been made to the financial statements.
INCREASE (DECREASE)
UNDISTRIBUTED NET
INVESTMENT
ACCUMULATED INCOME/ACCUMULATED
NET REALIZED DISTRIBUTIONS IN EXCESS OF
PAID-IN CAPITAL GAIN/LOSS NET INVESTMENT INCOME
$(136,845) $66,791 $70,054
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES --It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. However, federal taxes may be
imposed on the Fund upon the disposition of certain investments in passive
foreign investment companies. Withholding taxes on foreign interest and
dividends have been provided for in accordance with the Fund's understanding
of the applicable country's tax rules and rates.
At November 30, 1997, the Fund, for federal tax purposes, had a capital loss
carryforward of $1,738,228 which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent permitted
by the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2005 $1,738,228
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS --The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS --The Fund may enter into foreign currency
commitments for the delayed delivery of securities of foreign currency
exchange transactions. Purchase contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the Fund's
securities against currency fluctuations. Risks may arise upon entering into
these transactions from the potential inability of counterparts to meet the
terms of their commitments and from unanticipated movements in security prices
of foreign exchange rates. The foreign currency transactions are adjusted by
the daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the settlement
date.
At November 30, 1997, the Fund had outstanding foreign exchange contracts as
set forth below:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT FOREIGN CURRENCY IN EXCHANGE CONTRACTS APPRECIATION
DATE UNITS TO DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
CONTRACTS SOLD:
<C> <S> <C> <C> <C>
12/01/97 32,161,678 Indonesian Rupiah $8,860 $8,817 $43
</TABLE>
FOREIGN CURRENCY TRANSLATION --The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies ("FC") are translated into U.S. dollars based on the rate of
exchange of such currencies against U.S. dollars on the date of valuation.
Purchases and sales of securities and income and expenses are translated at
the rate of exchange quoted on the respective date that such transactions are
recorded. Differences between income and expense amounts recorded and
collected or paid are adjusted when reported by the custodian bank. The Fund
does not isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates
on securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at fiscal year
end, resulting from changes in the exchange rate.
RESTRICTED SECURITIES --Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the issuer's
expense either upon demand by the Fund or in connection with another
registered offering of the securities. Many restricted securities may be
resold in the secondary market in transactions exempt from registration. Such
restricted securities may be determined to be liquid under criteria
established by the Board of Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee.
Additional information on each restricted security held at November 30, 1997,
is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Shanghai Industrial Holdings Ltd. 11/3/1997 $76,661
USE OF ESTIMATES --The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ
from those estimated.
OTHER --Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1997, par value shares ($0.0001) authorized were as follows:
NUMBER OF SHARES
OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 405,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(A)
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,402,382 $ 13,816,205 1,121,851 $ 11,556,721
Shares redeemed (915,907) (8,814,153) (673,771) (7,122,242)
Net change resulting from Class A
Share transactions 486,475 $ 5,002,052 448,080 $ 4,434,479
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 543,977 $ 5,461,674 251,041 $ 2,607,100
Shares redeemed (300,440) (3,019,014) (28,120) (287,998)
Net change resulting from Class B
Share transactions 243,537 $ 2,442,660 222,921 $ 2,319,102
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 181,031 $ 1,834,751 64,647 $ 677,378
Shares redeemed (153,942) (1,563,237) (25,709) (268,881)
Net change resulting from Class C
Share transactions 27,089 $ 271,514 38,938 $ 408,497
Net change resulting from share
transactions 757,101 $ 7,716,226 709,939 $ 7,162,078
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(b) For the period from February 28, 1996 (date of initial public offering) to
November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE --Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.10% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at it sole
discretion
ADMINISTRATIVE FEE --Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE --The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Class A Shares, Class B Shares, and Class C
Shares. The Plan provides that the Fund may incur distribution expenses
according to the following schedule annually, to compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the period ended
November 30, 1997, and has no present intention of paying or accruing the
distribution services fee
SHAREHOLDER SERVICES FEE --Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES --FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC"), serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES --FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES --Organizational expenses of $48,248 were borne
initially by the Adviser. The Fund has reimbursed the Adviser for these
expenses. These expenses have been deferred and are being amortized over the
five-year period following the Fund's effective date. For the year ended
November 30, 1997, the Fund expensed $5,897 pursuant to this agreement.
GENERAL --Certain Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term, for the period ended
November 30, 1997, were as follows:
PURCHASES $23,188,165
SALES $15,991,912
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of countries for the Fund was as
follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Australia 11.8%
China 2.6
Hong Kong 20.2
Indonesia 1.6
Japan 53.3
New Zealand 0.8
Singapore 4.5
South Korea 0.9
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated International High Income Fund (a
portfolio of World Investment Series, Inc.) as of November 30, 1997, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated International High Income Fund of World Investment Series, Inc. at
November 30, 1997, and the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 20, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 981487507
Cusip 981487606
Cusip 981487705
G01934-01 (1/98)
[Graphic]
[Graphic]
Federated Emerging Markets Fund
2ND ANNUAL REPORT
NOVEMBER 30, 1997
ESTABLISHED 1996
President's Message
[Graphic]
Dear Fellow Shareholder:
Federated Emerging Markets Fund was created in February 1996, and I am pleased
to present its second Annual Report that covers its fiscal year reporting period
from December 1, 1996 through November 30, 1997.
The report begins with a discussion by portfolio manager Jolanta Wysocka, Vice
President, Federated Global Research Corp. Her discussion covers emerging market
economic and market conditions, and the fund's strategy. Following her
commentary is a complete list of the fund's investments and the financial
statements.
Federated Emerging Markets Fund offers shareholders significant long-term
investment opportunities from a select portfolio of many large- and
small-company stocks issued by international companies.* The companies are found
in Africa, Latin America, most of Asia, and parts of Europe. As of November 30,
1997, the fund's $72 million in assets were diversified across 277 holdings
representing 32 countries.
During the 12-month reporting period, the fund delivered positive total return
performance that eclipsed the negative returns of its benchmark, the IFC
Investable Composite Index,** and the average emerging markets fund. The fund's
broadly diversified selection across many stock issues, with individual holdings
averaging less than 1% of the fund's total assets, helped the fund's share value
increase.***
TOTAL NET ASSET
RETURN VALUE INCREASE
Class A Shares 4.86% $11.10 to $11.64 = 5%
Class B Shares 4.17% $11.04 to $11.50 = 4%
Class C Shares 4.07% $11.05 to $11.50 = 4%
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
** IFC Investable Composite Index is an investable, market
capitalization-weighted index of over 1,000 securities in 26 emerging market
countries. This index is unmanaged, and investments cannot be made in an index.
*** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns for the period based on offering price for Class A, B, and C
shares were (0.94%), (1.36%), and 3.08%, respectively.
This emerging markets fund has provided shareholders with strong returns since
it began operation on February 28, 1996. While the fund avoided the negative
returns of the emerging marketplace during the year, there will inevitably be
periods of negative short-term fluctuation, as well as positive returns.
In this investment environment, I recommend you add to your account on a regular
basis to take advantage of price fluctuations and to use the dollar-cost
averaging method of investing.+
Thank you for your confidence in Federated Emerging Markets Fund. We will
continue to keep you up-to-date on the details of your investment on a regular
basis. We appreciate that you have entrusted a portion of your wealth to the
fund.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1998
+ Dollar-cost averaging does not ensure a profit or protect against loss in
declining markets. Since such a plan of investing involves continuous investing
regardless of fluctuating price levels, investors should consider whether to
continue to invest in periods of low price levels.
Investment Review
[Graphic]
Jolanta Wysocka
Vice President
Federated Global Research Corp.
[Graphic]
AFTER A RELATIVELY SOLID FIRST HALF OF THE FUND'S FISCAL YEAR REPORTING PERIOD,
EMERGING MARKETS SUFFERED CONSIDERABLY DURING THE LATTER PART OF THE REPORTING
PERIOD. WHAT ARE YOUR COMMENTS ON THE ABOUT-FACE?
It has been a very interesting year for investors worldwide. During the first
part of the year, a wave of optimism swept the world of emerging markets.
Eastern Europe, Russia, and Latin America rallied strongly. Brazil and Mexico
were the darlings of emerging markets investors during the second quarter of
1997. Brazil, in particular, seemed to have possessed all the attributes of a
home run: cheap valuations, good macro story, low volatility (at least short
term), and strong price momentum, i.e., there was something for everyone.
As the bull run continued, most emerging markets funds were posting strong
double-digit gains after the first half of the year. A rude awakening came in
July 1997, when the situation in Southeast Asia began to deteriorate rapidly
with a number of attacks on the region's currencies. Problems in Southeast Asia
were well recognized by the investment community--weak financial systems and
deteriorating current account balances in Malaysia, Thailand, Philippines, and
Indonesia caused most emerging markets funds to underweight the region. What
proved to be hard to forecast was the degree to which markets throughout the
world would be affected by the Asian contagion. Shock waves of the Southeast
Asian crisis were felt particularly strongly in the Latin American and Russian
markets. Price volatility increased as commonly accepted forms of investment
analysis were widely suspended in favor of irrational behavior.
[Graphic]
HOW DID FEDERATED EMERGING MARKETS FUND PERFORM DURING THE FISCAL YEAR ENDED
NOVEMBER 30, 1997, COMPARED TO ITS BENCHMARK?
The fund's shareholders were spared from the highly negative returns associated
with emerging markets during the reporting period. In fact, over the 12-month
reporting period, the fund has provided a positive total return significantly
above both the benchmark index and the average emerging markets fund. Total
returns for the fund based on net asset value were: Class A Shares, 4.86%; Class
B Shares, 4.17%; and Class C Shares 4.07%.* In contrast, the fund's benchmark,
the IFC Investable Composite Index, produced a return of (15.57%) during the
same period of time. The average return of the 128 emerging market mutual funds
tracked by Lipper Analytical Services, Inc. was (2.31%).**
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns for the period based on offering price for Class A, B, and C
shares were (0.94%), (1.36%), and 3.08%, respectively.
** Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the respective categories indicated. These figures do not reflect sales charges.
[Graphic]
THE FUND IS BROADLY DIVERSIFIED AMONG COUNTRIES AND COMPANIES AT ALL TIMES. IN
THE PREVIOUS SEMI-ANNUAL REPORT, YOU CITED COUNTRY SELECTIONS AND ALLOCATION AS
PLAYING A KEY ROLE IN THE FUND'S ABILITY TO OUTPERFORM THE MARKET. DID THAT HOLD
TRUE FOR THE FULL FISCAL YEAR ENDED NOVEMBER 30, 1997?
Yes. Broad diversification, not only in terms of individual securities and
industry sectors, but more importantly in terms of countries and regions, is key
to risk reduction during the periods of extreme volatility such as those
witnessed in 1997.
Federated Emerging Markets Fund participated in the strong returns posted by the
Latin American markets, but without excessive overweight in the region. Limiting
exposure to Latin America proved beneficial in the second half of the year, when
the region experienced a sharp correction. African, Middle Eastern, and emerging
European markets proved to be excellent diversifiers due to low correlation with
Asian and Latin American markets, thus dampening the volatility while enhancing
portfolio return.
Southeast Asian markets posted dramatic losses for the year with Thailand down
76%, Malaysia down 70%, Indonesia down 58%, and the Philippines down 57%, as
measured by the IFC Investable Composite Index. Federated Emerging Markets Fund
remained underweighted in the Southeast Asian markets during 1997 avoiding the
currency problems there.
[Graphic]
WHAT WERE THE FUND'S COUNTRY ALLOCATIONS AS OF NOVEMBER 30, 1997?
The portfolio was well diversified across the following 32 countries:
PERCENTAGE
COUNTRY OF PORTFOLIO
Turkey 6.75%
Egypt 6.50
Russia 6.41
Mexico 5.52
Mauritius 5.03
Greece 4.72
Kenya 4.48
Poland 4.12
Ghana 3.76
Peru 3.62
Saudi Arabia 3.52
Lebanon 3.44
Brazil 3.39
Argentina 3.22
Portugal 2.94
India 2.90
Hong Kong 2.69
Czech Republic 2.22
Zimbabwe 2.25
Pakistan 2.19
Botswana 1.66
Thailand 1.61
Hungary 1.38
Chile 1.10
Indonesia 1.09
Korea 0.86
Sri Lanka 0.52
Slovak Republic 0.52
Philippines 0.35
China 0.23
Uruguay 0.18
Malaysia 0.08
[Graphic]
WHAT WERE THE FUND'S TOP HOLDINGS?
The top 10 holdings as of November 30, 1997 were:
PERCENTAGE
TOP HOLDINGS OF NET
NAME COUNTRY ASSETS INDUSTRY
Saudi Arabia Saudi
Fund, Ltd. Arabia 3.52% Mutual Fund
Social Security
Bank Ghana 2.33 Banking
Unified Energy Utilities--
System, ADR Russia 1.46 Electrical & Gas
Sechaba
Breweries, Ltd. Botswana 1.38 Beverages
Solidere,
DGR, 144A Lebanon 1.23 Real Estate
Banque Audi,
GDR, 144A Lebanon 1.21 Banking
Hurriyet
Gazetecilik ve
Matbaacilik A.S. Turkey 1.18 Publishing
Athens Medical Greece 1.16 Health Care
Portugal
Telecom S.A. Portugal 1.14 Telecoms
Aluworks Metals--
Ghana, Ltd. Ghana 1.09 Non-Ferrous
TOTAL PERCENTAGE OF
PORTFOLIO NET ASSETS 15.70%
[Graphic]
AS A POOR YEAR FOR EMERGING MARKETS AND A COMPARATIVELY STRONG YEAR FOR THE FUND
DRAWS TO A CLOSE, WHAT IS YOUR OUTLOOK FOR 1998, AND WHERE HAVE YOU FOUND NEW
OPPORTUNITIES?
Our long-term outlook for the asset class remains bullish. Emerging markets
should be the beneficiaries of capital inflows and technology transfer.
Despite poor relative performance, emerging markets are growing in importance as
an asset class. Vast majorities of the global population live and work in what
we classify as "developing economies" generating over half of the economic
output. Investment professionals in the United States and in Europe are well
aware of the long-term potential of this asset class. Long term, allocation to
this asset class should increase. In addition, emerging markets equities should
benefit from year-end rebalancing of investors' portfolios.
Due to recent poor price performance, emerging markets now offer compelling
valuations when compared to the U.S. equity market. In fact, the new year
appears to have the potential to be just as interesting as 1997 proved to be.
Southeast Asia will most certainly be the focus of everyone's attention. This
year could potentially mark the beginning of the recovery in that region.
Valuations and growth prospects in African, Middle Eastern, and selected Eastern
European markets are very attractive and position those markets for strong
recovery in 1998.
High levels of volatility combined with relatively inefficient information
delivery are likely to remain commonplace in emerging markets. Broad
diversification of holdings and close monitoring of risk factors are, therefore,
critical in the design and implementation of a successful emerging markets
strategy.
WHERE IN THE WORLD SHOULD YOU INVEST?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND FEDERATED EMERGING MARKETS FUND FEDERATED
EUROPEAN GROWTH FUND FEDERATED INTERNATIONAL EQUITY FUND FEDERATED INTERNATIONAL
GROWTH FUND FEDERATED INTERNATIONAL HIGH INCOME FUND FEDERATED INTERNATIONAL
INCOME FUND FEDERATED INTERNATIONAL SMALL COMPANY FUND FEDERATED LATIN AMERICAN
GROWTH FUND FEDERATED WORLD UTILITY FUND
Employ highly qualified, experienced managers in global investing to select
countries and companies outside the U.S. for long-term growth potential.
Call your investment representative to buy shares of 8 international equity
funds and 2 international income funds from Federated Investors.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL 1-800-341-7400 TO
ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU INVEST.
Foreign investing involves special risks including currency risks, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
FEDERATED EMERGING MARKETS FUND
(CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EMERGING MARKETS FUND (CLASS A
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
Emerging Markets Fund (Class A Shares) (the "Fund") from February 28, 1996
(start of performance) to November 30, 1997, compared to the International
Finance Corporation Investable Composite Index (IFCICI).+
"Graphic representation "10" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge =
$9,450). The Fund's performance assumes the reinvestment of all dividends and
distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The IFCICI is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The IFCICI has been adjusted to reflect reinvestment of
dividends on securities in the index. The index is unmanaged.
FEDERATED EMERGING MARKETS FUND
(CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EMERGING MARKETS FUND (CLASS B
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
Emerging Markets Fund (Class B Shares) (the "Fund") from February 28, 1996
(start of performance) to November 30, 1997, compared to the International
Finance Corporation Investable Composite Index (IFCICI).+
"Graphic representation "11" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 4.75% on any
redemption less than two years from the purchase date. The maximum contingent
deferred sales charge is 5.50% on any redemption less than one year from the
purchase date. The Fund's performance assumes the reinvestment of all dividends
and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The IFCICI is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The IFCICI has been adjusted to reflect reinvestment of
dividends on securities in the index. The index is unmanaged.
FEDERATED EMERGING MARKETS FUND
(CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EMERGING MARKETS FUND (CLASS C
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
Emerging Markets Fund (Class C Shares) (the "Fund") from February 28, 1996
(start of performance) to November 30, 1997, compared to the International
Finance Corporation Investable Composite Index (IFCICI).+
"Graphic representation "12" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 1.00% on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The IFCICI is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The IFCICI has been adjusted to reflect reinvestment of
dividends on securities in the index. The index is unmanaged.
FEDERATED EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--81.8%
AGRICULTURE--0.8%
5,600,000 Interfresh $ 356,184
111,800 Sefalana 203,462
Total 559,646
APPLIANCES & HOUSEHOLD DURABLES--0.0%
2 (a)(b)Samsung Electronics Co., GDR 44
AUTOMOBILE--1.3%
15,000 Bajaj Auto Ltd. 235,438
1,650 Bajaj Auto Ltd., GDR 28,875
6,200 (a)Gorkovsky Auto Plant 604,500
11,700 (a)(b)Mahindra and Mahindra, GDR 105,300
Total 974,113
BANKING--12.2%
4,700 Banco Comercial S.A., GDR 131,600
3,800 Banco Santiago, ADR 78,850
22,900 Banco Totta & Acores Nationalisiert, Class B 432,075
33,000 (a)Bank Handlowy W. Warszawie 387,193
4,700 Bank Rozwoju Eksportu S.A. 71,756
4,440 Bank Slaski S.A. 225,954
30,500 (b)Banque Audi, GDR 876,875
37,500 (a)(b)Banque Libanaise Pour Le Comm, Class B, GDR 721,875
127,200 Big Bank Gdanski S.A. 115,081
10 (a)Budapest Bank RT 75,235
36,000 (a)Commerce Asset Holdings Bhd 19,308
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
BANKING--CONTINUED
15,000 Commercial International Bank Egypt $ 302,382
8,700,000 Demirbank T.A.S. 244,513
74,900 (a)Grupo Financiero Banamex Accivel, Class B 164,144
1,767 (a)Grupo Financiero Banamex Accivel, Class L 3,657
9,400 Housing & Development Bank 248,787
431,168 Kenya Commercial Bank Ltd. 489,076
106,450 Mauritius Commercial Bank 468,815
620 National Bank of Greece 58,089
100,000 National Development Bank 373,663
657,419 National Industrial Credit Bank 569,642
4,500 OTP Bank RT 140,502
700,000 PT Bank International Indonesia 91,158
43,488 PT Bank International Indonesia, Warrants 954
600,000 PT Bank Negara Indonesia 94,585
106,800 PT Bank Tiara Asia 11,712
2,231,880 (a)Social Security Bank Ltd. 1,687,859
4,800 (a)Societe Generale (Egypt) 111,513
888,500 State Bank Mauritius 508,291
19,000 Wbk (Wielkopolski B) 96,691
Total 8,801,835
BEVERAGES--4.0%
360,000 Cervecer Backus & Johnston, Class T 326,551
4,600 Compania Cervecerias Unidas SA, ADR 124,200
2,600 Embotelladora Andina S.A., Class A, ADR 60,938
1,400 Embotelladora Andina S.A., Class B, ADR 28,875
62,500 Fomento Economico Mexicano, SA de C.V., Class B 515,158
30,250 (a)Guangdong Brewery Holdings Ltd. 4,304
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
BEVERAGES--CONTINUED
14,480 (a)Guiness Ghana Ltd. $ 4,195
74,200 Mauritius Breweries Ltd. 249,298
7,500 Nobleza Piccardo S.A.I.C. y F. 33,762
23,500 (a)Prazske Pivovary A.S. 91,155
11,800 Quilmes Industrial SA, ADR 153,400
187,115 Sasini Tea & Coffee Ltd. 277,098
942,800 Sechaba Breweries Ltd. 1,000,870
Total 2,869,804
BROADCASTING & PUBLISHING--0.2%
9,300 Grupo Televisa SA 172,107
BUILDING MATERIALS & COMPONENTS--2.1%
70,900 Apasco SA de CV 419,090
950,000 Baticim Bati Anadolu Cimento Sanayii AS 118,935
971,000 Borusan 52,098
127,585 Cementos Lima S.A. 255,358
179,111 Cementos Norte Pacasmayo 223,642
7,500 Gorazdze SA 203,562
424,000 Keramika Indonesia Associates 43,591
9,000 (a)(b)Suez Cement Co., GDR 182,025
Total 1,498,301
BUSINESS & PUBLIC SERVICES--0.9%
8,800 Banco Frances del Rio de la Plata S.A., ADR 237,050
500,000 Dhana Siam Finance & Securities Co., Ltd. 149,068
700,000 Nava Finance & Sec. 200,000
150,000 Phatra Thanakit Co. 89,441
Total 675,559
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
CHEMICALS--1.6%
1,190 Aksa Akrilik Kimya Sanayii AS $ 93
4,200 (a)BorsodChem RT 116,915
3,000 Deza Valasske Mezirici AS 204,597
8,400 (a)Paints & Chemical Industry 252,593
34,000 (b)Paints & Chemical Industry, GDR 340,000
2,751 Pannonplast RT 113,834
6,700 Polifarb-Cieszyn SA 27,467
2,233 (a)Polifarb-Cieszyn SA, Class D 9,154
550,000 (a)Yizheng Chemcial Fibre Co. 123,087
Total 1,187,740
CONGLOMERATE--3.2%
10,000 (a)Beijing Enterprises 26,325
25,013 Compania Naviera Perez Companc SA, Class B 178,658
12,900 Controladora Comercial Mexicana SA de CV, GDR 277,350
9,500 Grupo Carso SA de CV 62,689
5,600 Grupo Carso SA de CV, ADR 72,100
9,400 Grupo Elektra S.A. de C.V., GDR 291,400
242,000 Guangdong Invest 153,396
40,000 Rogers and Company Ltd. 199,773
9,800,000 (a)Sabanci Holding 550,857
2,687,000 (a)TA Holdings 531,703
Total 2,344,251
CONSTRUCTION & HOUSING--1.7%
29,300 (a)Arabian International Construction 650,580
10,000 (a)Bufete Industrial SA, ADR 95,000
12,500 Empresas ICA Sociedad Controladora S.A., ADR 193,750
2,875 MISR International Bank 88,076
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
CONSTRUCTION & HOUSING--CONTINUED
700 Misr Elgedida for Housing & Reconstruction $ 88,393
2,120 (a)Nasr City Co. for Housing & Construction 143,079
Total 1,258,878
DATA PROCESSING & REPRODUCTION--1.7%
10,000 (a)ComputerLand Poland SA 136,274
300,000 (a)Founder Hong Kong Ltd. 232,850
10,000 Infosys Technologies Ltd. 357,990
10,000 (a)Infosys Technologies Ltd. 357,990
488,000 (a)Legend Holdings Ltd. 134,147
660 (a)PVT 34,515
Total 1,253,766
ELECTRICAL & ELECTRONICS--0.9%
1,078,000 (a)Harbin Power Equipment Co., Class H 164,552
22,000 (a)Krasnoyarsk Electrovyaz 206,800
3,834,000 Vestel Elektronik Sanayi Ve Ticaret AS 293,876
Total 665,228
ELECTRONIC COMPONENTS, INSTRUMENTS--2.0%
4,854,000 Aselsan 254,240
3,365,000 Bekoteknik 197,744
276,800 Hana Microelectronics Co., Ltd. 728,964
1,200,000 Raks Elektronik 297,401
Total 1,478,349
ENERGY - OIL & GAS--3.3%
1,000,000 (a)CNPC Hong Kong Ltd. 278,126
9,700 Lukoil Oil Co., ADR 739,145
28,000 Pakistan State Oil 291,415
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
ENERGY - OIL & GAS--CONTINUED
3,000 (a)Tatneft, ADR $ 369,532
2,500 (a)Tatneft, ADR 307,944
12,361,000 Turcas Petrolculuk 290,557
35,200 (a)Unipetrol 102,613
Total 2,379,332
ENERGY EQUIPMENT & SERVICES--0.1%
8,000 Transportadora de Gas de Sur S.A., Class B, ADR 85,500
ENERGY SOURCES--1.2%
15,200 (a)Hub Power Co., GDR 471,200
5,000 MOL Magyar Olaj-es Gazipari RT 105,329
6,400 YPF Sociedad Anonima 215,759
2,600 YPF Sociedad Anonima, ADR 87,263
Total 879,551
ENGINEERING--0.7%
22,300 (a)Exbud SA 189,143
131,000 Mostostal Export S.A. 351,852
Total 540,995
FINANCIAL SERVICES--1.2%
7,200 (a)Credicorp Ltd. 131,400
4,400 (a)Egyptian Financial & Industrial 251,507
13,500 Fincorp Investment Co. Ltd. 49,342
390 Grupo Financiero Inbursa, S.A. de C.V., Class B 1,439
92,000 Industrial Credit & Investment Corp. of India Ltd. 171,907
85,000 Industrial Development Bank of India Ltd. 184,021
400,000 (a)PT Putra Surya Multidana 63,057
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
FINANCIAL SERVICES--CONTINUED
9,000 Rashid Hussain Bhd $ 10,784
285 (a)Rashid Hussain Bhd, Warrants 102
Total 863,559
FOOD & HOUSEHOLD PRODUCTS--3.3%
25,000 Chipita International 482,107
8,100 Chipita International 156,203
7,200 (a)Egyptian Starch & Gl 77,018
5,332 Estabelecimentos Jeronimo Martins & Filho SGPS, S.A. 168,527
110,000 Grupo Industrial Maseca SA de CV, Class B 114,640
298,968 Happy World Foods Ltd. 215,827
360,000 (a)International Container Terminal Services, Inc. 58,712
15,000 (a)(b)Red October, RDC 337,500
119,900 Riopesca - Aquaculture of Western Greece SA 641,431
216,830 (a)Uchumi Supermarket Ltd. 133,224
Total 2,385,189
FOOD PROCESSING--4.0%
4,900 (a)Agros Holding S.A. 87,277
2,894 Cokoladovny A.S. 404,646
500,000 (a)Colcom 72,438
60,534 (a)D'Onofrino SA 16,228
5,800 (a)Eastern Co. 134,421
27,200 Goody's S.A. 473,898
30,000 (a)International Foods Co. (Hostess) 671,636
540,000 Mauritius Oil Refineries Ltd. 279,501
8,473,000 (a)Merko Gida Sanayi 160,199
160,000 Mon Tresor & Mon Desert Ltd. 273,871
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
FOOD PROCESSING--CONTINUED
2,400 (a)North Cairo Mills Co. $ 81,165
371,000 Pesquera Austral SA 238,432
Total 2,893,712
GOLD MINES--0.3%
33,000 Ashanti Goldfields Co., GDR 237,189
HEALTH & PERSONAL CARE--1.9%
64,900 Athens Medic Center 843,360
3,250 (a)Galena AS 185,806
39,000 Kimberly-Clark de Mexico 175,212
46,500 (b)Shanghai Industrial Holdings Ltd. 146,774
Total 1,351,152
INSURANCE--1.2%
96,300 Adamjee Insurance 192,574
260,000 (a)British American Insurance Co. 46,038
11,000 (a)Enterprise Insurance Co. Ltd. 3,560
22,000 (a)Mundial Confianca 368,091
116,394 (a)Swan Insurance Co., Ltd. 259,475
Total 869,738
LEISURE & TOURISM--1.7%
81,000 Grand Baie Hotel 189,398
185,103 New Mauritius Hotels Ltd. 358,860
183,592 Sun Resorts Ltd. 394,275
63,598 United Docks Ltd. 101,064
686,000 (a)Zimbabwe Sun International Ltd. 213,314
Total 1,256,911
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
MACHINERY & ENGINEERING--0.1%
15,400 (a)Stalexport SA $ 97,095
MANUFACTURING--0.5%
3,900 Ceska Zbrojovka A.S. 169,885
40,000 Fabryka Mebli Forte S.A. 156,064
Total 325,949
MERCHANDISING--1.0%
339,000 Migros Turk 320,473
500,000 PT Matahari Putra Prima 82,248
1,800 Santa Isabel S.A., ADR 32,964
5,166,000 Uki Uluslararasi Konfeksiyon Imalat Ve Ticaret 277,181
Total 712,866
METALS - NON FERROUS--4.5%
3,500 Aluminum of Greece S.A. 202,738
705,721 (a)Aluworks Ghana Ltd. 787,635
29,532 Cia de Minas Buenaventura SA 182,203
12,000 Cia de Minas Buenaventura SA, Class B 107,925
68,000 Grupo Mexico S.A., Class B 260,376
19,350 Hindalco Industries Ltd., GDR 435,375
71,500 Industrias Penoles S.A. 294,235
2,380,000 (a)Jiangxi Copper Co. Ltd. 317,116
3,800 Madeco SA, ADR 64,125
39,287 Minsur S.A. 97,965
20,900 (a)Slaska Fabryka Kabli SA 262,949
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
METALS - NON FERROUS--CONTINUED
2,200 Sociedad Quimica Y Minera De Chile, ADR $ 101,200
40,000 Southern Peru Ltd. 157,767
Total 3,271,609
METALS - STEEL--2.5%
155,700 (a)Acindar Industria Argentina de Aceros SA 334,099
16,000 Pohang Iron and Steel Co. Ltd. 621,120
38,500 Siderar S.A., Class A 160,989
8,606,000 Turk Demir Dokum 615,672
9,800 Usinas Siderurgicas de Minas Gerais SA, ADR 66,150
Total 1,798,030
MINING--0.8%
483,461 (a)Athi River Mining Ltd. 91,398
18,000 Hindustan Petroleum Corp. Ltd. 220,129
14,500 Silver & Baryte Ores Mining 272,547
Total 584,074
MISCELLANEOUS MATERIALS & COMMODITIES--0.3%
190,000 (a)Fotex Rt. 188,690
MULTI-INDUSTRY--1.8%
61,126 Alfa, S.A. de C.V., Class A 460,669
934,000 Firestone East Africa Ltd. 360,504
55,000 (a)Renong Berhad 28,243
900,000 Trans Zambezi Industries 405,000
1,000,000 (a)Trans Zambezi Industries Ltd. 49,470
Total 1,303,886
PHARMACEUTICALS--2.2%
5,540 (a)Egypt International Pharmaceuticals 375,524
2,700 Gedeon Richter RT 255,273
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
PHARMACEUTICALS--CONTINUED
8,300 (a)Jelfa SA $ 178,343
5,300 Laboratorio Chile, ADR 113,288
45,000 Lavipharm S.A. 291,162
72,000 PT Darya Varia Laboratoria 11,350
2,808 Slovakofarna AS 377,307
50,000 Tempo Scan Pacific 19,191
Total 1,621,438
PUBLISHING--1.2%
5,000,000 Hurriyet Gazetecilik ve Matbaacilik A.S. 855,924
REAL ESTATE--1.2%
61,000 (a)(b)Solidere, GDR 892,125
TELECOMMUNICATIONS--6.0%
2,400 Asia Satellite Telecommunications Holdings Ltd., ADR 50,400
16,600 CPT Telefonica del Peru S.A., Class B, ADR 348,600
11,200 Carso Global Telecom, Class A-1 40,295
1,500 PT Indosat, ADR 33,563
234,000 PT Telekomunikasi Indonesia 171,611
467,000 (a)Pakistan Telecommunications Corp., Class A 371,427
5,000 Philippine Long Distance Telephone Co. 120,172
18,000 Portugal Telecom S.A. 829,079
6,000 (a)SPT Telekom A.S. 632,074
3,000 (a)Samara Svyazinform 172,500
85,000 (a)Tele 2000 S.A.- La Nueva Com de Telefonos 117,058
17,000 Telecom Argentina S.A. 103,738
10,200 Telecom Argentina S.A., ADR 313,013
6,275 Telecomunicacoes de Sao Paulo SA, Rights 119
130,874 Telefonica Del Peru CPT, Class B 272,034
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
TELECOMMUNICATIONS--CONTINUED
1,900 Telefonica de Argentina S.A., ADR $ 62,819
75,000 Telefonica de Argentina S.A., Class B 248,341
7,700 Telefonos de Mexico, Class L, ADR 381,150
20,000 Telex-Chile S.A., ADR 82,500
Total 4,350,493
TEXTILES & APPAREL--0.4%
2,152,500 Ak-Al Tekstil Sanayii AS 84,694
7,127,000 Aksu Iplik Dokuma Ve Boya Apre Fabrikalari T.A.S. 180,274
Total 264,968
TRANSPORTATION - AIRLINES--1.0%
32,885 Air Mauritius Ltd. 48,973
4,079,000 (a)Kenya Airways Ltd. 578,353
487,000 (a)Turk Hava Yollari A.O. 93,321
Total 720,647
TRANSPORTATION - ROAD & RAIL--0.3%
772,000 PT Citra Marga Nusaphala Persada 169,321
78,000 (a)Shanghai Dazhong Taxi Co., Class B 46,020
Total 215,341
TRANSPORTATION - SHIPPING--0.2%
200,000 Cosco Pacific Ltd. 139,710
UTILITIES - ELECTRICAL & GAS--5.3%
643,000 (a)(b)Beijing Datang Power 297,366
350,000 Centrais Eletricas Brasileiras SA 160,912
46,000 Central Costanera S.A., Class B 117,343
100 (a)Egypt Gas 705,779
18,510 (a)Electricidade de Portugal SA 334,556
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
UTILITIES - ELECTRICAL & GAS--CONTINUED
3,700 Enersis S.A., ADR $ 110,538
254,000 (a)Kenya Power & Lighting Co. Ltd. 744,293
21,346 Manila Electric Co., Class B 73,902
437,230 (a)Sui Sthn Gas Pipe 260,812
46,700 (a)Unified Energy System, RDC 1,056,821
Total 3,862,322
WHOLESALE & INTERNATIONAL TRADE--0.7%
40,000 Elektrim Spolka Akcyina S.A. 384,507
151,623 Enrique Ferreyros S.A. 144,774
Total 529,281
TOTAL COMMON STOCKS (IDENTIFIED COST $61,573,554) 59,216,897
PREFERRED STOCKS--4.3%
ELECTRONIC COMPONENTS, INSTRUMENTS--0.5%
10,000,000 Ericsson Telecomunicacoes SA 351,573
ENERGY SOURCES--0.4%
1,200,000 Petroleo Brasileiro SA, Preference 262,868
FOOD & HOUSEHOLD PRODUCTS--1.1%
50,500 (a)(b)Red October 782,750
MINING--0.0%
10,100 Companhia Vale Do Rio Doce 91
PUBLISHING--1.0%
145,000 Saraiva S.A. - Liveiros Edit, Preference 725,457
TELECOMMUNICATIONS--0.4%
254,000 (a)Cia Riograndense De Telecomunicacoes, Pfd. 262,174
187,843 Telecomunicacoes de Sao Paulo SA, Preference 49,447
Total 311,621
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
TEXTILES & APPAREL--0.0%
49,000,000 (a)Texpar SA, Preference $ 441
UTILITIES - ELECTRICAL & GAS--0.9%
4,900,000 Companhia Energetica de Minas Gerais, Preference 236,320
100,000,000 (a)Companhia Energetica do Ceara-Coelce, Preference, Series A 341,657
12,000 (a)Permenergo, Pfd. 69,000
Total 646,977
TOTAL PREFERRED STOCKS (IDENTIFIED COST $3,695,376) 3,081,778
MUTUAL FUNDS--3.5%
FINANCIAL SERVICES--3.5%
300,000 Saudi Arabia Fund Ltd. (IDENTIFIED COST $3,075,000) 2,551,500
(C)REPURCHASE AGREEMENT--7.7%
$ 5,590,000 BT Securities Corp., 5.73%, dated 11/28/1997, due 12/1/1997
(AT AMORTIZED COST) 5,590,000
TOTAL INVESTMENTS (IDENTIFIED COST $73,933,930)(D) $ 70,440,175
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities amounted
to $4,682,634 which represents 6.5% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $74,984,203. The
net unrealized depreciation of investments on a federal tax basis amounts to
$4,544,028 which is comprised of $6,588,083 appreciation and $11,132,111
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($72,402,035) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR --American Depository Receipt
BIG --Bond Investors Guaranty
GDR --Global Depository Receipt
RDC --Russian Depository Certificate
SA --Support Agreement
TRANs --Tax and Revenue Anticipation Notes
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $73,933,930 and tax $ 70,440,175
cost $74,984,203)
Cash 2,525
Cash denominated in foreign currencies (at identified cost $247,344) 243,078
Income receivable 83,901
Receivable for investments sold 2,393,081
Receivable for shares sold 621,625
Net receivable for foreign currency exchange contracts sold 1,565
Deferred organizational costs 40,082
Total assets 73,826,032
LIABILITIES:
Payable for investments purchased $848,232
Payable for shares redeemed 430,898
Payable for taxes withheld 6,316
Accrued expenses 138,551
Total liabilities 1,423,997
NET ASSETS for 6,242,999 shares outstanding $ 72,402,035
NET ASSETS CONSIST OF:
Paid in capital $ 77,469,823
Net unrealized depreciation of investments and translation of assets and (3,500,378)
liabilities in foreign currency
Accumulated net realized loss on investments and foreign currency transactions (1,563,404)
Net operating loss (4,006)
Total Net Assets $ 72,402,035
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($48,509,287 / 4,165,840 shares outstanding) $11.64
Offering Price Per Share (100/94.50 of $11.64)* $12.32
Redemption Proceeds Per Share $11.64
CLASS B SHARES:
Net Asset Value Per Share ($19,949,688 / 1,734,158 shares outstanding) $11.50
Offering Price Per Share $11.50
Redemption Proceeds Per Share (94.50/100 of $11.50)** $10.87
CLASS C SHARES:
Net Asset Value Per Share ($3,943,060 / 343,001 shares outstanding) $11.50
Offering Price Per Share $11.50
Redemption Proceeds Per Share (99.00/100 of $11.50)** $11.39
</TABLE>
* See "Investing in the Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $52,146) $ 1,068,796
Interest 329,405
Total income 1,398,201
EXPENSES:
Investment advisory fee $ 775,299
Administrative personnel and services fee 185,000
Custodian fees 262,397
Transfer and dividend disbursing agent fees and expenses 128,972
Directors'/Trustees' fees 866
Auditing fees 17,687
Legal fees 6,917
Portfolio accounting fees 85,518
Distribution services fee--Class B Shares 113,971
Distribution services fee--Class C Shares 23,747
Shareholder services fee--Class A Shares 109,154
Shareholder services fee--Class B Shares 37,990
Shareholder services fee--Class C Shares 7,916
Share registration costs 58,266
Printing and postage 45,699
Insurance premiums 3,655
Taxes 840
Miscellaneous 9,964
Total expenses 1,873,858
Waivers and reimbursements--
Waiver of investment advisory fee (408,722)
Net expenses 1,465,136
Net operating loss (66,935)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized loss on investments and foreign currency transactions (2,055,377)
Net change in unrealized depreciation of investments and translation
of assets and
liabilities in foreign currency (4,169,559)
Net realized and unrealized loss on investments and foreign (6,224,936)
currency transactions
Change in net assets resulting from operations $ (6,291,871)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income/(operating loss) $ (66,935) $ 16,654
Net realized loss on investments and foreign currency
transactions ($(206,412) and $(310,725), respectively, as
computed for federal tax purposes) (2,055,377) (343,726)
Net change in unrealized appreciation/(depreciation) of
investments and translation of assets and liabilities in
foreign currency (4,169,559) 669,181
Change in net assets resulting from operations (6,291,871) 342,109
SHARE TRANSACTIONS--
Proceeds from sale of shares 102,012,438 29,998,514
Net asset value of shares issued in connection with the
acquisition
of the Blanchard Worldwide Emerging Markets Fund -- 6,732,148
Cost of shares redeemed (45,239,352) (15,151,951)
Change in net assets resulting from share transactions 56,773,086 21,578,711
Change in net assets 50,481,215 21,920,820
NET ASSETS:
Beginning of period 21,920,820 --
End of period $ 72,402,035 $ 21,920,820
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.10 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.01 0.02
Net realized and unrealized gain on investments
and foreign currency 0.53(e) 1.08
Total from investment operations 0.54 1.10
NET ASSET VALUE, END OF PERIOD $11.64 $11.10
TOTAL RETURN(B) 4.86% 11.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.14% 1.97%*
Net investment income 0.13% 0.31%*
Expense waiver/reimbursement(c) 0.65% 3.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $48,525 $17,327
Average commission rate paid(d) $0.0006 $0.0029
Portfolio turnover 102% 32%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) The amount shown in this caption for a share outstanding does not correspond
with the aggregate net realized and unrealized gain (loss) on investments and
foreign currency for the period ended due to the timing of sales and repurchases
of Fund shares in relation to fluctuating market values of the investments of
the Fund.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.04 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.04) (0.02)
Net realized and unrealized gain on investments
and foreign currency 0.50(e) 1.06
Total from investment operations 0.46 1.04
NET ASSET VALUE, END OF PERIOD $11.50 $11.04
TOTAL RETURN(B) 4.17% 10.40%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.89% 2.72%*
Net operating loss (0.69%) (0.71%)*
Expense waiver/reimbursement(c) 0.65% 3.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $19,951 $3,747
Average commission rate paid(d) $0.0006 $0.0029
Portfolio turnover 102% 32%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) The amount shown in this caption for a share outstanding does not correspond
with the aggregate net realized and unrealized gain (loss) on investments and
foreign currency for the period ended due to the timing of sales and repurchases
of Fund shares in relation to fluctuating market values of the investments of
the Fund.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.05 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.04) (0.02)
Net realized and unrealized gain on investments
and foreign currency 0.49(e) 1.07
Total from investment operations 0.45 1.05
NET ASSET VALUE, END OF PERIOD $11.50 $11.05
TOTAL RETURN(B) 4.07% 10.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.89% 2.72%*
Net operating loss (0.65%) (0.77%)*
Expense waiver/reimbursement(c) 0.65% 3.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $3,943 $847
Average commission rate paid(d) $0.0006 $0.0029
Portfolio turnover 102% 32%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) The amount shown in this caption for a share outstanding does not correspond
with the aggregate net realized and unrealized gain (loss) on investments and
foreign currency for the period ended due to the timing of sales and repurchases
of Fund shares in relation to fluctuating market values of the investments of
the Fund.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. ORGANIZATION
World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of eight portfolios. The
financial statements included herein are only those of Federated Emerging
Markets Fund (the "Fund"), a diversified portfolio. The financial statements of
the other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The Fund offers three classes of shares: Class A Shares, Class
B Shares and Class C Shares. The investment objective of the Fund is to provide
long-term growth of capital.
On August 19, 1996, the Fund acquired all the net assets of The Blanchard
Worldwide Emerging Markets Fund pursuant to a Plan of reorganization approved by
The Blanchard Worldwide Emerging Markets Fund shareholders on August 16, 1996.
The acquisition was accomplished by a tax-free exchange of 619,772 of the Fund's
Class A Shares (valued at $6,732,148) for the 1,096,761 shares of The Blanchard
Worldwide Emerging Markets Fund on August 16, 1996. The Blanchard Worldwide
Emerging Markets Fund net assets at that date ($6,745,897), including $472,330
of unrealized depreciation were combined with those of the Fund. The aggregate
net assets of the Fund and The Blanchard Worldwide Emerging Markets Fund
immediately before the acquisition were $14,135,447 and $6,745,897,
respectively. Immediately after the acquisition, the combined aggregate net
assets of the Fund were $20,872,401.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS-- Foreign equity securities are valued at the last sales
price reported in the market in which they are primarily traded. If no sale on
the recognized exchange is reported or the security is traded over-the-counter,
the foreign securities are valued at the mean between the last closing bid and
asked prices. Investments in other mutual funds are valued at net asset value.
Short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value.
REPURCHASE AGREEMENTS-- It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS-- Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions and net operating losses. The following reclassifications have been
made to the financial statements.
INCREASE (DECREASE)
ACCUMULATED UNDISTRIBUTED
PAID-IN NET REALIZED NET INVESTMENT
CAPITAL GAIN/LOSS INCOME
$(881,974) $815,039 $66,935
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES-- It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
At November 30, 1997, the Fund for federal tax purposes, had a capital loss
carryforward of $666,862 which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will expire as
follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2004 $ 3,130,096(a)
2004 310,725
2005 206,412
(a) Capital loss carryforward is attributable to the acquisition of the assets
of The Blanchard Worldwide Emerging Markets Fund and is limited to $149,725 that
can be used in future periods to offset income arising from net realized gains.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS-- The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency exchange
transactions. Purchased contracts are used to acquire exposure to foreign
currencies; whereas, contracts to sell are used to hedge the Fund's securities
against currency fluctuations. Risks may arise upon entering these transactions
from the potential inability of counterparts to meet the terms of their
commitments and from unanticipated movements in security prices or foreign
exchange rates. The foreign currency transactions are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the settlement date.
At November 30, 1997, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
PURCHASES DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Greek Drachma 12/1/1997 20,219,633 $74,652 $73,087 $1,565
</TABLE>
FOREIGN CURRENCY TRANSLATION-- The accounting records of the Fund are maintained
in U.S. dollars. All assets and liabilities denominated in foreign currencies
("FC") are translated into U.S. dollars based on the rate of exchange of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expenses are translated at the rate of exchange quoted on
the respective date that such transactions are recorded. Differences between
income and expense amounts recorded and collected or paid are adjusted when
reported by the custodian bank. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
RESTRICTED SECURITIES-- Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions exempt
from such registration. In some cases, the issuer of restricted securities has
agreed to register such securities for resale, at the issuer's expense either
upon demand by the Fund or in connection with another registered offering of the
securities. Many restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may be
determined to be liquid under criteria established by the Directors. The Fund
will not incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the secondary market
or, if no market prices are available, at the fair value as determined by the
Fund's pricing committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Mahindra and Mahindra, GDR 02/27/1996 - 01/27/1997 $ 131,075
Samsung Electronics Co., GDR 02/02/1995 106
Banque Audi, GDR 04/28/1997 - 06/25/1997 731,800
Banque Libanaise Pour Le Comm,
Class B, GDR 04/25/1997 - 06/25/1997 679,375
Suez Cement Co., GDR 11/25/1996 132,750
Paints & Chemical Industry, GDR 09/26/1997 399,500
Red October, RDC 05/19/1997 292,500
Shanghai Industrial Holdings Ltd. 05/06/1997 270,592
Solidere, GDR 04/25/1997 - 06/25/1997 901,750
Beijing Datang Power 09/18/1997 352,356
Red October 07/15/1997 871,125
</TABLE>
USE OF ESTIMATES-- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ from
those estimated.
OTHER-- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1997, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF PAR
VALUE CAPITAL
SHARE CLASS NAME STOCK AUTHORIZED
Class A Shares 165,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 435,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 5,469,055 $ 72,534,377 2,289,480 $ 25,292,447
Shares issued in connection with acquisition
of The Blanchard Worldwide Emerging
Markets Fund -- -- 619,772 6,732,148
Shares redeemed (2,864,255) (37,739,280) (1,348,212) (14,945,833)
Net change resulting from Class A Share
transactions 2,604,800 $ 34,795,097 1,561,040 $ 17,078,762
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,737,682 $ 22,920,945 348,457 $ 3,768,962
Shares redeemed (343,037) (4,467,783) (8,944) (97,907)
Net change resulting from Class B Share
transactions 1,394,645 $ 18,453,162 339,513 $ 3,671,055
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 498,984 $ 6,557,116 86,670 $ 937,105
Shares redeemed (232,631) (3,032,289) (10,022) (108,211)
Net change resulting from Class C Share
transactions 266,353 $ 3,524,827 76,648 $ 828,894
Net change resulting from share
transactions 4,265,798 $ 56,773,086 1,977,201 $ 21,578,711
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(b) For the period from February 28, 1996 (date of initial public offering) to
November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-- Federated Global Research Corp., the Fund's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to 1.25% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE-- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE-- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Corporation's Class A, Class B, and Class C Shares.
The Plan provides that the Fund may incur distribution expenses according to the
following schedule annually, to compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the period ended
November 30, 1997, and has no present intention of paying or accruing a
distribution services fee.
SHAREHOLDER SERVICES FEE-- Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-- FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES-- FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES-- Organizational expenses of $48,748 were borne
initially by the Adviser. The Fund has reimbursed the Adviser for these
expenses. These expenses have been deferred and are being amortized over the
five-year period following the Fund's effective date. For the year ended
November 30, 1997, the Fund expensed $5,958 pursuant to this agreement.
GENERAL-- Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $ 107,216,378
SALES $ 54,359,923
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of countries was as follows:
PERCENTAGE OF PERCENTAGE OF
COUNTRY NET ASSETS COUNTRY NET ASSETS
Argentina 3.2% Malaysia 0.1%
Botswana 1.7 Mauritius 5.0
Brazil 3.4 Mexico 5.5
Chile 1.1 Pakistan 2.2
China 0.2 Peru 3.6
Czech Republic 2.5 Philippines 0.4
Egypt 6.5 Poland 4.1
Ghana 3.8 Portugal 2.9
Greece 4.7 Russia 6.4
Hong Kong 2.7 Saudi Arabia 3.5
Hungary 1.4 Sri Lanka 0.5
Indonesia 1.1 Slovak 0.5
India 2.9 Thailand 1.6
Kenya 4.5 Turkey 6.8
Korea 0.9 Uruguay 0.2
Lebanon 3.4 Zimbabwe 2.3
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Directors and
Shareholders of WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated Emerging Markets Fund (a portfolio of
World Investment Series, Inc.) as of November 30, 1997, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Emerging Markets Fund of World Investment Series, Inc. at November 30,
1997, and the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 20, 1998
Directors
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
Officers
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 981487804
Cusip 981487887
Cusip 981487879
G01967-01 (1/98)
Federated European Growth Fund
2ND ANNUAL REPORT NOVEMBER 30, 1997
Established 1996
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
I am pleased to present the second Annual Report of Federated European Growth
Fund. This report contains information about the fund's operation over the
fiscal year reporting period from December 1, 1996 through November 30, 1997.
The report begins with a discussion by portfolio manager Frank Semack, Vice
President, Federated Global Research Corp. This discussion covers international
economic and market conditions and fund strategy. Following his commentary is a
complete list of the fund's common stock investments and the financial
statements.
Federated European Growth Fund offers shareholders very significant long-term
growth opportunities from a select portfolio of stocks issued by major European
companies.* Although volatility impacted the European market later in the
reporting period, it was an overall strong year for European stocks, and the
fund's returns were highly positive. At the end of the reporting period, the
fund's $23 million portfolio was broadly diversified across 126 stocks, with the
average holding representing less than 1% of the fund's total assets. The
performance for each share class follows:**
TOTAL CAPITAL NET ASSET
RETURN INCOME GAINS VALUE INCREASE
Class A Shares 17.54% $0.09 $0.37 $11.80 to $13.33 = 13%
Class B Shares 16.61% $0.07 $0.37 $11.74 to $13.18 = 12%
Class C Shares 16.55% $0.08 $0.37 $11.73 to $13.15 = 12%
Thank you for entrusting a portion of your wealth to this highly diversified
approach to the dynamic European market. Remember, reinvesting your dividends is
a convenient way to build your account and help your money grow through the
benefit of compounding.+
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1998
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the 12-month reporting period based on
offering price for Class A, B, and C Shares were 11.04%, 10.86%, and 15.48%,
respectively.
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
INVESTMENT REVIEW
[Graphic]
Frank Semack
Vice President
Federated Global Research Corp.
[Graphic]
WHAT IS YOUR APPRAISAL OF DEVELOPMENTS IN THE EUROPEAN MARKETS OVER THE LAST
YEAR?
The first half of the fund's fiscal year was shaped by two principal factors: a
strong U.S. dollar and widespread expectations that the interest rate backdrop
would remain largely favorable. Banking, insurance, oils, and certain cyclical
industries did very well in that environment.
The U.S. dollar's strength -- up some 10% against the deutschemark in the
November 1996/May 1997 period -- gave continental European companies direct
pricing advantages as well as the indirect benefit of higher translation profits
from their overseas subsidiaries.
As for European interest rates, they were either relatively stable or falling at
the long end of yield curves. By contrast, short-term rates exhibited a more
diverse pattern. In the United Kingdom, they began to trend up in the first
quarter of 1997 as a result of Bank of England policies reinforcing market
trends. Elsewhere, most significantly in Germany, central banks simply let the
markets do a bit of tightening on their own. Italy and Spain, however, moved in
the opposite direction, with their short-term rates falling substantially on the
back of "convergence rallies" ahead of European Monetary Union (EMU) in 1999.
The easing did not occur in a straight line, though, because of periodic doubts
about whether the two countries, especially Italy, would actually qualify for
EMU.
In the six months to May 1997, in local currency terms, Europe ex-U.K. was up
almost 22%, some 9% above the United Kingdom's market gain; in dollar terms, the
results were much closer to 10% each. The strong local currency performance in
continental Europe had by that time considerably narrowed some of the valuation
gap that had previously existed vis-^-vis U.S. equities. Yet, as it turned out,
this was merely a prelude to two even stronger months.
[Graphic]
AND INCREASED VOLATILITY IN THE MARKET?
Yes. Of course, a low inflation environment justifies relatively high earnings
multiples, but by late July 1997, a number of stocks had clearly gotten ahead of
sustainable valuations. One could only justify their very high price/earnings
ratios by assuming that the risk of downward revisions to the underlying
earnings growth expectations was negligible. The so-called "equity risk premium"
that investors require for investing in equities is a function of growth
expectations, dividend yields, and interest rates. When both dividend yields and
interest rates are relatively low, the premium is largely driven by growth
expectations. Consequently, stock valuations (and, therefore, prices) become
extremely sensitive to shifts in those expectations. That is exactly what
happened in August 1997 when the markets gave back all of their July 1997 gains.
[Graphic]
DID THE VOLATILITY EVENTUALLY SUBSIDE?
Yes. By November 1997, rationality had reasserted itself, and market
fluctuations subsided to some extent. The change in mood was based on
assessments that the impact of the Asian economic crisis on both Europe and
the U.S. would be relatively muted, especially as far as Europe was
concerned.
[Graphic]
HOW DID THE FEDERATED EUROPEAN GROWTH FUND PERFORM DURING ITS 1997 FISCAL YEAR?
For the 12-month reporting period ended November 30, 1997, the Federated
European Growth Fund delivered a total return of 17.54% for Class A Shares,
16.61% for Class B Shares, and 16.55% for Class C Shares based on net asset
value.* These returns were ahead of the 16.19% average total return of the 71
European region funds tracked by Lipper Analytical Services, Inc.,** and built
on the solid performance of the previous year. The Morgan Stanley Capital
International (Europe) Index*** registered a total return of 21.75% in the same
period. The performance of the fund on this comparison was adversely affected by
volatile investor funds' flows.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the 12-month period based on offering price
for Class A, B, and C Shares were 11.04%, 10.86%, and 15.48%, respectively.
** Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.
*** The Morgan Stanley Capital International (Europe) Index is a market
value-weighted average of the performance of over 500 securities listed on
the stock exchanges of 14 countries in the European region. This index is
unmanaged, and investments cannot be made in an index.
[Graphic]
HOW MUCH DID THE FUND'S COUNTRY EXPOSURES CHANGE DURING THE REPORTING
PERIOD?
First, this is a bottom-up fund, and individual country weightings are often
simply the result of stock-specific decisions. Having said that, the United
Kingdom has consistently represented the largest single-country exposure in the
fund, given that market's size and depth relative to the rest of Europe.
Beyond that, I would highlight our trading approach to investments in Eastern
Europe. The area has never represented a substantial portion of the fund's
assets, but it does offer some interesting opportunities from time to time.
After cutting back on our exposure to Russia, Croatia, and the Czech Republic in
the first half, we subsequently traded in Polish banks and anticipated the
privatization of Matav, the Hungarian telecommunications company. By the end of
the fiscal year, however, we were essentially out of Eastern Europe, except for
Matav. For a time, there was also a modest exposure to Greece, but once that had
been liquidated, our main emerging market exposure was Portugal, ahead of its
reclassification as a developed market by Morgan Stanley Capital International
(Europe) Index. Elsewhere, for example in Austria, Belgium, and Scandinavia, our
exposure throughout the year was determined by stock and sector-specific issues,
not by country decisions.
HOW WAS THE PORTFOLIO ALLOCATED AMONG COUNTRIES AS OF NOVEMBER 30, 1997, AND
WHAT WERE THE TOP TEN HOLDINGS?
The portfolio was diversified across the following countries:
PERCENTAGE OF
COUNTRY NET ASSETS
United Kingdom 33.92%
France 17.08
Switzerland 11.85
Germany 11.15
Spain 6.68
Netherlands 6.03
Sweden 3.76
Denmark 3.49
Italy 2.98
Finland 2.24
Portugal 1.63
Norway 1.11
Belgium 0.91
Austria 0.62
Ireland 0.58
Hungary 0.42
The top 10 holdings at November 30, 1997 were as follows:
PERCENTAGE MARKET
TOP HOLDINGS OF NET CAPITALIZATION
NAME COUNTRY ASSETS ($ BILLIONS)
Novartis AG Switzerland 3.05% $99.5
Roche Holding AG Switzerland 1.98 62.9
Nestle SA Switzerland 1.87 57.9
Commerzbank AG Germany 1.84 14.9
Zeneca Group United Kingdom 1.73 30.2
Scor SA France 1.68 1.2
Siemens AG Germany 1.60 33.0
Union Bank of Switzerland Switzerland 1.57 27.0
SKW Trostberg Germany 1.47 2.2
Cadbury Schweppes PLC United Kingdom 1.44 10.4
TOTAL PERCENTAGE OF PORTFOLIO NET ASSETS 18.23%
[Graphic]
WHAT IS YOUR OUTLOOK FOR EUROPE IN 1998?
Market action in 1997 was, for the most part, dominated by corporate
restructuring themes. Notable examples involving fund holdings were domestic
mergers such as SE-Banken and Trygg Hansa in Sweden and the proposed
cross-border merger between Reed Elsevier and Wolters Kluwer. The trend was
reinforced at the start of the fund's current fiscal year with the proposed
mega-merger between Swiss Bank Corporation and fund holding UBS to create the
world's second largest bank.
What all these deals have in common is a quest for economies of scale on a
domestic or pan-European basis at the very least and, sometimes, in global
terms. We expect that this trend will continue in 1998, especially in the
financial sector, given that many of the service industries in Europe are ripe
for an overhaul thanks to the impact of technology and competitive pressures.
From a broader economic perspective, EMU will clearly command even more
attention this year because of the dictates of the timetable. Regardless of
whether or not EMU as currently envisaged makes economic sense, it is scheduled
to become a reality by January 1999. The issue for the markets is going to be
whether they are willing to buy into the deal. If the answer is "yes,"
pan-European consolidation will become even more necessary as protection, in the
form of various financial and monetary barriers, disappears. This will, of
course, involve continual restructuring, and will, therefore, present many more
opportunities for investors to gain from a secular trend. There is an outside
chance that the run-up to EMU could prove to be rocky in the foreign exchanges,
in which case investors could still benefit from "divergence plays."
My bet, however, is that financial convergence, resulting from the drive to
European integration, will remain by far the most positive influence on the
fund, as it has since inception.
WHERE IN THE WORLD SHOULD YOU INVEST?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND
[Graphic]
FEDERATED EMERGING MARKETS FUND
[Graphic]
FEDERATED EUROPEAN GROWTH FUND
[Graphic]
FEDERATED INTERNATIONAL EQUITY FUND
[Graphic]
FEDERATED INTERNATIONAL GROWTH FUND
[Graphic]
FEDERATED INTERNATIONAL HIGH INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL SMALL COMPANY FUND
[Graphic]
FEDERATED LATIN AMERICAN GROWTH FUND
[Graphic]
FEDERATED WORLD UTILITY FUND
Employ highly qualified, experienced managers in global investing to select
countries and companies outside the U.S. for long-term growth potential.
Call your investment representative to buy shares of 8 international equity
funds and 2 international income funds from Federated Investors.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL 1-800-341-7400 TO
ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU INVEST.
Foreign investing involves special risks including currency risks, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
FEDERATED EUROPEAN GROWTH FUND
(CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EUROPEAN GROWTH FUND (CLASS A
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
European Growth Fund (Class A Shares) (the "Fund") from February 28, 1996 (start
of performance) to November 30, 1997, compared to the Morgan Stanley Capital
International (Europe) Index (MSDUE14).+
"Graphic representation "13" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge
= $9,450). The Fund's performance assumes the reinvestment of all dividends
and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSDUE14 is a market value-weighted average of the performance of over 500
securities listed on the stock exchanges of 14 countries in the European
region. The MSDUE14 is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The MSDUE14 has been adjusted to reflect
reinvestment of dividends on securities in the index. The index is unmanaged.
FEDERATED EUROPEAN GROWTH FUND
(CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EUROPEAN GROWTH FUND (CLASS B
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
European Growth Fund (Class B Shares) (the "Fund") from February 28, 1996 (start
of performance) to November 30, 1997, compared to the Morgan Stanley Capital
International (Europe) Index (MSDUE14).+
"Graphic representation "14" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 4.75% contingent deferred sales charge on any
redemption less than 2 years from the purchase date. The maximum contingent
deferred sales charge is 5.50% on any redemption less than 1 year from the
purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSDUE14 is a market value-weighted average of the performance of over 500
securities listed on the stock exchanges of 14 countries in the European
region. The MSDUE14 is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The MSDUE14 has been adjusted to reflect
reinvestment of dividends on securities in the index. The index is unmanaged.
FEDERATED EUROPEAN GROWTH FUND
(CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EUROPEAN GROWTH FUND (CLASS C
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
European Growth Fund (Class C Shares) (the "Fund") from February 28, 1996 (start
of performance) to November 30, 1997, compared to the Morgan Stanley Capital
International (Europe) Index (MSDUE14).+
"Graphic representation "15" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 1.00% on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSDUE14 is a market value-weighted average of the performance of over 500
securities listed on the stock exchanges of 14 countries in the European
region. The MSDUE14 is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The MSDUE14 has been adjusted to reflect
reinvestment of dividends on securities in the index. The index is unmanaged.
FEDERATED EUROPEAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--103.3%
AEROSPACE & MILITARY TECHNOLOGY--1.9%
7,057 British Aerospace $ 192,604
8,500 Thomson CSF 245,930
Total 438,534
APPLIANCES & HOUSEHOLD DURABLES--1.5%
3,000 Electrolux AB, Class B 236,224
1,810 Philips Electronics N.V. 119,586
Total 355,810
AUTOMOBILE--2.4%
330 Bayerische Motoren Werke AG 246,447
12,300 Volvo AB, Class B 328,149
Total 574,596
BANKING--15.7%
4,532 ABN-AMRO Holdings NV 86,430
3,000 BG Bank AS 194,863
5,400 Banco Bilbao Vizcaya SA 163,148
3,000 Banque Nationale de Paris 146,359
10,167 Barclays PLC 245,203
4,040 Banco Popular Espanol 257,394
1,200 CLF-Dexia France 124,608
12,500 Commerzbank AG, Frankfurt 434,505
1,190 Compagnie Financiere de Paribas, Class A 85,975
945 Credit Suisse Group 138,191
820 Den Danske Bank 97,363
2,600 Deutsche Bank, AG 166,748
5,610 Dresdner Bank Ag, Frankfurt 217,592
28,000 Istituto Bancario San Paolo di Torino 231,934
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
BANKING-- CONTINUED
22,363 Lloyds TSB Group PLC $ 254,940
18,116 National Westminster Bank PLC 274,753
2,600 Sydbank AS 139,443
290 UBS - Union Bank of Switzerland 369,161
1,035 Unidanmark, Class A 73,087
Total 3,701,697
BEVERAGE & TOBACCO--2.8%
17,850 Bass PLC 256,248
25,000 Gallaher Group PLC 135,112
20,000 Imperial Tobacco Group PLC 133,423
1,850 Tabacalera SA 141,439
Total 666,222
BROADCASTING & PUBLISHING--6.0%
32,500 British Sky Broadcasting Group PLC 241,513
1,100 Canal Plus 191,368
22,600 Pearson 314,896
21,500 Reed International PLC 228,943
5,600 Schibsted A/S 95,002
9,450 VNU - Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 226,347
917 Wolters Kluwer NV 121,402
Total 1,419,471
BUILDING MATERIALS & COMPONENTS--1.5%
6,000 Cimpor Cimentos de Portugal 151,964
231 Holderbank Financiere Glaris AG, Class B 201,384
1,131 Tarmac 2,197
Total 355,545
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
CHEMICALS--4.0%
1,200 Akzo Nobel NV $ 211,100
5,000 Bayer AG 185,058
11,809 BOC Group PLC 188,473
10,050 Skw Trostberg AG 347,348
Total 931,979
CONSTRUCTION & HOUSING--0.9%
6,500(a) Brisa Auto Estradas de Portugal 199,545
DATA PROCESSING & REPRODUCTION--0.6%
232(a) BETA Systems Software AG 22,233
4,200 Misys PLC 118,814
Total 141,047
ELECTRICAL & ELECTRONICS--2.9%
1,600 Bang & Olufsen Hlg, Class B 94,154
32,000 General Electric Co. PLC 208,343
6,400 Siemens AG 375,798
Total 678,295
ELECTRONIC COMPONENTS, INSTRUMENTS--2.9%
1,500(a) ASM Lithography Holding NV, ADR 93,750
3,600(a) SGS-Thomas Microelectronics N.V. 253,872
6,100 Schneider SA 326,529
Total 674,151
ENERGY EQUIPMENT & SERVICES--0.7%
900(a) Cie Gen Geophysique 97,573
2,850 Smedvig ASA, Class B 72,524
Total 170,097
ENERGY SOURCES--6.1%
16,864 British Petroleum Co. PLC 230,701
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
ENERGY SOURCES-- CONTINUED
2,010 Elf Aquitaine SA $ 233,234
28,200 Eni SPA 164,624
25,000(a) Lasmo 111,045
6,100 Repsol SA 263,866
5,200 Saga Petroleum A.S., Class A 93,278
30,000 Shell Transport & Trading Co. 204,188
1,358 Total SA-B 142,625
Total 1,443,561
FINANCIAL SERVICES--1.4%
7,900 ING Groep, N.V. 321,200
FOOD & HOUSEHOLD PRODUCTS--5.3%
32,649 Cadbury Schweppes PLC 339,117
8,306 Grand Metropolitan PLC 75,611
1,055 Group Danon 168,348
300 Nestle SA 441,436
16,064 Reckitt & Colman PLC 234,136
Total 1,258,648
FOREST PRODUCTS & PAPER--1.1%
10,000 Enso Oy, Class R 87,783
8,000 UPM - Kymmene OY 171,814
Total 259,597
HEALTH & PERSONAL CARE--12.0%
2,600(a) Elan Corp. PLC, ADR 137,150
12,535 Glaxo Wellcome PLC 275,215
350 L'Oreal 133,993
450 Novartis AG 718,965
1,820 Novo-Nordisk, Class B 222,877
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
HEALTH & PERSONAL CARE-- CONTINUED
52 Roche Holding AG $ 465,367
77 Smithkline Beecham Corp. 715
2,000 Synthelabo 254,095
65 UCB 214,734
12,800 Zeneca Group 408,579
Total 2,831,690
INDUSTRIAL COMPONENTS--2.4%
2,000 Bertrand Faure 136,195
12,466 GKN PLC 270,963
1,700 Sylea 153,202
Total 560,360
INSURANCE--8.1%
4,020 AXA 291,730
140 Baloise Holdings 249,404
8,600 Commercial Union PLC 118,375
13,607 Guardian Royal Exchange PLC 65,495
610 Muenchener Rueckversicherungs-Gesellschaft AG 190,593
18,000 Royal & Sun Alliance Insurance Group PLC 162,033
9,200 Scor SA 395,691
3,460 Skandia Forsakrings AB 182,376
4,500 Trygg-Hansa AB, Class B 140,161
281 Zurich Versicherungsgesellschaft 118,249
Total 1,914,107
LEISURE & TOURISM--2.0%
560 Accor SA 105,866
12,300 Compass Group 146,869
15,852 Granada Group PLC 226,763
Total 479,498
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
MACHINERY & ENGINEERING--4.2%
67 ABB AG $ 89,142
670 Mannesmann SA 311,919
5,000 Partek Corp. 92,753
10,200 Rauma Oy 176,015
14,030 Siebe PLC 255,198
514 Zardoya-Otis SA 59,808
Total 984,835
MERCHANDISING--2.8%
8,000 Boots Co. PLC 117,548
10,000 Hamleys PLC 55,480
10,000 La Rinascente SPA 75,829
16,200 Marks & Spencer PLC 166,624
20,000 Next 249,957
Total 665,438
METALS - NON FERROUS--1.2%
2,200 Pechiney SA, Class A 86,386
15,000 Rio Tinto PLC 181,135
Total 267,521
METALS - STEEL--1.0%
15,000 Usinor Sacilor 235,800
MISCELLANEOUS MATERIALS & COMMODITIES--1.1%
1,220 Compagnie de St. Gobain 165,745
2,140 Vidrala SA 91,565
Total 257,310
MULTI-INDUSTRY--0.8%
29,078 BBA Group PLC 184,899
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
RECREATION, OTHER CONSUMER GOODS--0.9%
29,280 EMI Group PLC $ 220,552
TELECOMMUNICATIONS--4.9%
1,345(a) France Telecommunications 49,395
6,000 Koninklijke PTT Nederland NV 240,930
25,100(a) Matav RT 99,456
36,900 Telecom Italia SPA 230,043
8,700 Telefonica de Espana 250,889
42,000 Vodafone Group PLC 280,898
Total 1,151,611
TRANSPORTATION - AIRLINES--0.9%
24,000 British Airways 217,666
UTILITIES - ELECTRICAL & GAS--3.3%
1,800 Electricidade de Portugal SA 32,534
12,780 Endesa SA 240,412
12,900 Energy Group PLC 138,455
8,150 Iberdrola SA 104,123
20,000 PowerGen PLC 258,233
Total 773,757
TOTAL COMMON STOCKS (IDENTIFIED COST $22,713,179) 24,335,039
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
PREFERRED STOCKS--1.2%
BANKING--0.6%
3,600(a) Bank Austria AG, Pfd. $ 147,081
BUSINESS & PUBLIC SERVICES--0.6%
420 SAP AG 129,323
TOTAL PREFERRED STOCKS (IDENTIFIED COST $267,491) 276,404
TOTAL INVESTMENTS (IDENTIFIED COST $22,980,670)(B) $ 24,611,443
</TABLE>
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to $22,980,670. The
net unrealized appreciation of investments on a federal tax basis amounts to
$1,630,773 which is comprised of $2,062,728 appreciation and $431,955
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($23,557,129) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR --American Depository Receipt
AG -- Aktiengesellschaft
PLC --Public Limited Company
SA --Societe Anonyme
SPA --Standby Purchase Agreement
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $22,980,670) $ 24,611,443
Income receivable 45,622
Receivable for investments sold 844,933
Receivable for shares sold 101,489
Deferred organizational costs 35,209
Total assets 25,638,696
LIABILITIES:
Payable for investments purchased $ 195,833
Payable for shares redeemed 9,393
Net payable for foreign exchange contracts 3,346
Payable to Bank 1,839,000
Payable for taxes withheld 2,265
Accrued expenses 31,730
Total liabilities 2,081,567
NET ASSETS for 1,772,918 shares outstanding $ 23,557,129
NET ASSETS CONSIST OF:
Paid in capital $ 21,185,701
Net unrealized appreciation of investments and translation of assets and
liabilities in foreign 1,625,445
currency
Accumulated net realized gain on investments and foreign currency transactions 775,346
Undistributed net investment income (29,363)
Total Net Assets $ 23,557,129
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($17,008,476 / 1,275,859 shares outstanding) $13.33
Offering Price Per Share (100/94.50 of $13.33)* $14.11
Redemption Proceeds Per Share $13.33
CLASS B SHARES:
Net Asset Value Per Share ($5,780,597 / 438,673 shares outstanding) $13.18
Offering Price Per Share $13.18
Redemption Proceeds Per Share (94.50/100 of $13.18)** $12.46
CLASS C SHARES:
Net Asset Value Per Share ($768,056 / 58,386 shares outstanding) $13.15
Offering Price Per Share $13.15
Redemption Proceeds Per Share (99.00/100 of $13.15)** $13.02
</TABLE>
* See "Investing in the Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $39,508) $ 279,481
Interest 63,257
Total income 342,738
EXPENSES:
Investment advisory fee $ 141,895
Administrative personnel and services fee 185,000
Custodian fees 47,346
Transfer and dividend disbursing agent fees and expenses 71,956
Directors'/Trustees' fees 737
Auditing fees 17,749
Legal fees 5,080
Portfolio accounting fees 83,148
Distribution services fee--Class B Shares 27,278
Distribution services fee--Class C Shares 3,896
Shareholder services fee--Class A Shares 25,082
Shareholder services fee--Class B Shares 9,093
Shareholder services fee--Class C Shares 1,299
Share registration costs 32,687
Printing and postage 34,581
Insurance premiums 3,254
Taxes 239
Miscellaneous 7,815
Total expenses 698,135
Waivers and reimbursements--
Waiver of investment advisory fee $ (141,895)
Reimbursement of other operating expenses (253,837)
Total waivers and reimbursements (395,732)
Net expenses 302,403
Net investment income 40,335
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency 706,296
transactions
Net change in unrealized appreciation of investments and
translation of assets and liabilities
in foreign currency 1,254,529
Net realized and unrealized gain on investments and 1,960,825
foreign currency transactions
Change in net assets resulting from operations $ 2,001,160
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 40,335 $ 37,815
Net realized gain on investments and foreign currency transactions
($775,804 and $178,546, respectively, as computed for federal tax purposes) 706,296 183,114
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 1,254,529 370,916
Change in net assets resulting from operations 2,001,160 591,845
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (33,183) --
Class B Shares (8,052) --
Class C Shares (1,338) --
Distributions from net realized gains on investments and foreign
currency transactions
Class A Shares (131,318) --
Class B Shares (41,600) --
Class C Shares (6,086) --
Change in net assets resulting from distributions to shareholders (221,577) --
SHARE TRANSACTIONS--
Proceeds from sale of shares 39,304,669 8,968,714
Net asset value of shares issued to shareholders in payment of distributions 176,299 --
declared
Cost of shares redeemed (22,413,018) (4,850,963)
Change in net assets resulting from share transactions 17,067,950 4,117,751
Change in net assets 18,847,533 4,709,596
NET ASSETS:
Beginning of period 4,709,596 --
End of period (including undistributed net investment income of $0 and $42,383,
respectively) $ 23,557,129 $ 4,709,596
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06(e) 0.14
Net realized and unrealized gain on investments and
foreign currency 1.93 1.66
Total from investment operations 1.99 1.80
LESS DISTRIBUTIONS
Distributions from net investment income (0.09) --
Distributions from net realized gain on investments and
foreign currency transactions (0.37) --
Total distributions (0.46) --
NET ASSET VALUE, END OF PERIOD $ 13.33 $ 11.80
TOTAL RETURN(B) 17.54% 18.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.91% 1.75%*
Net investment income 0.50% 1.60%*
Expense waiver/reimbursement(c) 2.79% 11.10%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $17,008 $3,318
Average commission rate paid(d) $0.0563 $0.0223
Portfolio turnover 119% 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.74 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.03)(e) 0.01
Net realized and unrealized gain (loss) on investments and
foreign currency 1.91 1.73
Total from investment operations 1.88 1.74
LESS DISTRIBUTIONS
Distributions from net investment income (0.07) --
Distributions from net realized gain on investments and
foreign currency transactions (0.37) --
Total distributions (0.44) --
NET ASSET VALUE, END OF PERIOD $ 13.18 $ 11.74
TOTAL RETURN(B) 16.61% 17.40%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.66% 2.50%*
Net investment income (loss) (0.25)% 0.08%*
Expense waiver/reimbursement(c) 2.79% 11.10%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $5,781 $1,215
Average commission rate paid(d) $0.0563 $0.0223
Portfolio turnover 119% 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.73 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.03)(e) 0.01
Net realized and unrealized gain (loss) on investments and
foreign currency 1.90 1.72
Total from investment operations 1.87 1.73
LESS DISTRIBUTIONS
Distributions from net investment income (0.08) --
Distributions from net realized gain on investments and
foreign currency transactions (0.37) --
Total distributions (0.45) --
NET ASSET VALUE, END OF PERIOD $ 13.15 $ 11.73
TOTAL RETURN(B) 16.55% 17.30%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.66% 2.50%*
Net investment income (loss) (0.23)% 0.09%*
Expense waiver/reimbursement(c) 2.79% 11.06%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $768 $176
Average commission rate paid(d) $0.0563 $0.0223
Portfolio turnover 119% 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. ORGANIZATION
World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of eight portfolios. The
financial statements included herein are only those of Federated European Growth
Fund (the "Fund"), a diversified portfolio. The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The Fund offers three classes of shares: Class A Shares, Class
B Shares, and Class C Shares. The investment objective of the fund is to provide
long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- Foreign and domestic equity securities are valued at
the last sale price reported on a national securities exchange or
over-the-counter market. In the absence of recorded sales for equity securities,
they are valued according to the mean between the last closing bid and asked
prices. Short-term foreign and domestic securities are valued at the prices
provided by an independent pricing service. However, short-term foreign and
domestic securities with remaining maturities of 60 days or less at the time of
purchase may be valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS -- It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS -- Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions. The following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
UNDISTRIBUTED NET INVESTMENT
ACCUMULATED NET INCOME/ACCUMULATED DISTRIBUTIONS IN
REALIZED GAIN/(LOSS) EXCESS OF NET INVESTMENT INCOME
$69,508 $(69,508)
Net investment income, net realized gains, and net assets were not affected by
this reclassification.
FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
DEFERRED EXPENSES -- The costs incurred by the Fund with respect to registration
of its shares in its first fiscal year, excluding the initial expense of
registering its shares, have been deferred and are being amortized over a period
not to exceed five years from the Fund's commencement date.
FOREIGN EXCHANGE CONTRACTS -- The Fund may enter into foreign currency exchange
contracts as a way of managing foreign exchange rate risk. The Fund may enter
into these contracts for the purchase or sale of a specific foreign currency at
a fixed price on a future date as a hedge or cross-hedge against either specific
transactions or portfolio positions. The objective of the Fund's foreign
currency hedging transactions is to reduce the risk that the U.S. dollar value
of the Fund's foreign-currency-denominated securities will decline in value due
to changes in foreign currency exchange rates. All foreign currency exchange
contracts are "marked-to-market" daily at the applicable translation rates
resulting in unrealized gains or losses. Realized gains or losses are recorded
at the time the foreign currency exchange contract is offset into a closing
transaction or by delivery or receipt of the currency. Risks may arise upon
entering into these contracts from the potential inability of the counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.
At November 30, 1997, the Fund had outstanding foreign exchange contracts as set
forth below:
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
DATE
Contracts
Purchased:
12/1/97 2,367,080 Belgian $ 66,566 $ 65,057 $(1,509)
Franc
Contracts
Sold:
12/2/97 97,690 Pound $158,086 $159,923 $(1,837)
Sterling
Net Unrealized Depreciation on Foreign Exchange Contracts $(3,346)
FOREIGN CURRENCY TRANSLATION -- The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies ("FC") are translated into U.S. dollars based on the rate of exchange
of such currencies against U.S. dollars on the date of valuation. Purchases and
sales of securities, income, and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank. The Fund does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ from
those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1997, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 405,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,044,836 $26,359,674 731,810 $7,658,479
Shares issued to shareholders in payment of
distributions declared 10,569 121,753 -- --
Shares redeemed (1,060,707) (14,036,778) (450,649) (4,847,403)
Net change resulting from Class A share
transactions 994,698 $12,444,649 281,161 $2,811,076
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 658,177 $ 8,379,795 103,835 $1,140,538
Shares issued to shareholders in payment of
distributions declared 4,112 47,162 -- --
Shares redeemed (327,141) (4,302,291) (310) (3,560)
Net change resulting from Class B share
transactions 335,148 $ 4,124,666 103,525 $1,136,978
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 357,054 $ 4,565,199 15,002 $ 169,697
Shares issued to shareholders in payment of
distributions declared 643 7,385 -- --
Shares redeemed (314,313) (4,073,949) -- --
Net change resulting from Class C share
transactions 43,384 $ 498,635 15,002 $ 169,697
Net change resulting from share
transactions 1,373,230 $17,067,950 399,688 $4,117,751
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(b) For the period from February 28, 1996 (date of initial public offering) to
November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at it sole
discretion
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Class A Shares, Class B Shares, and Class C
Shares. The Plan provides that the Fund may incur distribution expenses
according to the following schedule annually, to compensate FSC.
PERCENTAGE OF AVERAGE DAILY
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the period ended
November 30, 1997, and has no present intention of paying or accruing the
distribution services fee
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC"), serves as transfer and dividend disbursing agent for the Fund.
The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $42,822 were borne
initially by the Adviser. The Fund has reimbursed the Adviser for these
expenses. These expenses have been deferred and are being amortized over the
five-year period following the Fund's effective date. For the year ended
November 30, 1997, the Fund expensed $5,234 pursuant to this agreement.
GENERAL -- Certain Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term, for the period ended
November 30, 1997, were as follows:
PURCHASES $33,764,504
SALES $15,504,069
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of countries for the Fund was as
follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Austria 0.6%
Belgium 0.9
Denmark 3.5
United Kingdom 33.9
Finland 2.2
France 17.1
Germany 11.2
Hungary 0.4
Ireland 0.6
Italy 3.0
Netherlands 6.0
Norway 1.1
Portugal 1.6
Spain 6.7
Sweden 3.8
Switzerland 11.8
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated European Growth Fund (a portfolio of
World Investment Series, Inc.) as of November 30, 1997, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated European Growth Fund of World Investment Series, Inc. at November 30,
1997, and the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 20, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 981487861
Cusip 981487853
Cusip 981487846
G01979-01 (1/98)
[Graphic]
FEDERATED INTERNATIONAL SMALL COMPANY FUND
2ND ANNUAL REPORT
NOVEMBER 30, 1997
ESTABLISHED 1996
PRESIDENT'S MESSAGE
Dear Fellow Shareholder:
Federated International Small Company Fund was created in 1996, and I am pleased
to present its second Annual Report. This report contains complete information
about the fund's operation over its fiscal year reporting period from December
1, 1996 through November 30, 1997.
The report begins with a commentary by the fund's portfolio manager, Tracy
Stouffer, Vice President of Federated Global Research Corp., which covers
international economic and market conditions and fund strategy. Following her
commentary is a complete listing of the fund's investments and the
financial statements.
This fund is managed to bring shareholders long-term opportunities from a
well-researched portfolio of small-cap international stocks.+ At the end of the
reporting period, the $240 million fund was invested in more than 160 small-cap
stocks in 39 countries across 3 continents. This broad diversification is a
hallmark of successful international investing.*
Wise stock selection is another hallmark of successful international investing
and of the fund. During the 12-month reporting period, the fund delivered
double-digit total return performance that far eclipsed the negative return of
the overall international small company market and the barely positive return of
the average international small company fund. The fund's superlative stock
selection and its broad diversification helped the fund share value increase
substantially.**
<TABLE>
<CAPTION>
NET ASSET
TOTAL RETURN VALUE INCREASE
<S> <C> <C>
Class A Shares 16.23% $12.26 to $14.25 = 16%
Class B Shares 15.33% $12.20 to $14.07 = 15%
Class C Shares 15.34% $12.19 to $14.06 = 15%
</TABLE>
+ Small-Cap Stocks have historically experienced greater volatility than
average.
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
** Performance quoted, based on net asset value, represents past performance and
is not indicative of future results. Investment return and principal value will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Total returns for the 12-month reporting period
based on offering price for Class A, B, and C Shares were 9.87%, 9.84%, and
14.36%, respectively.
This international small company fund has provided shareholders with strong
returns since it began operation on February 28, 1996, and it's important to
remember that the true measure of this fund's performance is clearly in years
rather than months. There will inevitably be periods of negative short-term
fluctuation, as well as the positive returns we have experienced since the
fund's inception.
Thank you for your confidence in Federated International Small Company Fund. We
hope you are pleased with its performance. We will continue to keep you
up-to-date on the details of your investment.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1998
INVESTMENT REVIEW
[Graphic]
Tracy P. Stouffer
Vice President
Federated Global Research Corp.
[Graphic]
DURING THE FIRST HALF OF THE FUND'S FISCAL YEAR, INTERNATIONAL SMALL COMPANY
STOCKS BARELY POSTED POSITIVE RETURNS WHILE LAGGING BEHIND LARGE COMPANY STOCKS.
DID THAT TREND CONTINUE THROUGH THE REST OF THE YEAR?
Absolutely. In general, it has been a mega-cap market around the world. With the
high level of merger and acquisition activity, much of the focus, particularly
in Europe, has been on the large banks and insurance companies.
[Graphic]
WHAT IS THE OVERALL SMALL-CAP CLIMATE?
International small-caps are selling at very discounted valuations in the wake
of the Asian currency crisis. Small-cap stock prices worldwide are stabilizing
and recovering in tune with their fundamentals. Excluding Asia, small-cap stocks
should continue to offer strong growth at discounted prices. The region of
choice continues to be Europe, where the sell-off has provided many
opportunities--especially in outsourcing and oil services.
[Graphic]
IN A STOCK PICKER'S MARKET, FEDERATED INTERNATIONAL SMALL COMPANY FUND
VASTLY OUTPERFORMED THE INTERNATIONAL SMALL-CAP STOCK MARKET OVERALL--WHICH
EXPERIENCED A NEGATIVE RETURN--AS WELL AS ITS PEER GROUP. WHAT ARE THE
NUMBERS?
The fund's total returns, based on net asset value, were 16.23% for Class A
Shares, 15.33% for Class B Shares, and 15.34% for Class C Shares.* On the other
hand, the small company market returned -9.23%, as represented by the
FT/S&P-Actuaries World, ex-U.S., Medium-Small Cap Index.** The fund also
significantly outperformed the 0.98% return of the 27 international small
company funds tracked by Lipper Analytical Services, Inc.***
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns for the 12-month reporting period based on offering price
for Class A, B, and C Shares were 9.87%, 9.84%, and 14.36%, respectively.
** FT/S&P-Actuaries World, ex-U.S., Medium-Small Cap Index is a total return,
market cap-weighted index of 1,092 companies from 25 countries. The index is
unmanaged and investments cannot be made in an index.
*** Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category indicated. These figures do not reflect sales charges.
[Graphic]
IN THE SEMI-ANNUAL REPORT THAT COVERED THE FIRST SIX MONTHS OF THE FUND'S FISCAL
YEAR, YOU SINGLED OUT GREEK AND CHINA-RELATED HOLDINGS AS CONTRIBUTING TO THE
FUND'S HIGH LEVEL OF OUTPERFORMANCE. WHAT FACTORS CAME INTO PLAY DURING THE REST
OF THE FUND'S FISCAL YEAR?
After a visit to China in September, we turned bearish on the Hong Kong/China
story and took profits in most of the Red Chips held. We also reduced our
exposure to Greece after a strong run due to fears that it would be caught up in
emerging market woes and perhaps be forced to devalue the currency.
We have adopted a "wait and see" approach to these markets in order to determine
when the markets have stabilized. Assets were reinvested in Canada, the United
Kingdom, Argentina, and Ireland.
[Graphic]
WHAT WERE THE FUND'S TOP TEN HOLDINGS?
As of November 30, 1997, the fund's top ten holdings were:
<TABLE>
<CAPTION>
PERCENTAGE
TOP HOLDINGS OF
NAME COUNTRY PORTFOLIO INDUSTRY
<S> <C> <C> <C>
Robert Walters United Kingdom 1.64% Employment
PLC Services
JBA Holdings
PLC United Kingdom 1.40% Software
Colt Telecom United Kingdom 1.33% Telecommunications
Group PLC
Tele Pizza SA Spain 1.29% Restaurant
Ericsson SPA Italy 1.27% Equipment
Farstad Shipping Norway 1.23% Transportation --
Shipping
Simac Techniek Netherlands 1.21% Information
Technology
Consulting
CSP International
Industria
Calze SPA Italy 1.20% Textile
Ryanair Holdings Ireland 1.14% Transportation--
PLC, ADR Airlines
Autogrill SPA Italy 1.13% Restaurant
<S> <C>
TOTAL PERCENTAGE OF PORTFOLIO ASSETS 12.84%
</TABLE>
[Graphic]
WHAT COUNTRIES WERE REPRESENTED IN THE PORTFOLIO AS OF NOVEMBER 30, 1997?
The portfolio was well-diversified across the following 39 countries.
<TABLE>
<CAPTION>
COUNTRY PERCENTAGE OF PORTFOLIO
<S> <C>
United Kingdom 14.44%
Norway 7.63%
Netherlands 5.97%
Canada 5.83%
Israel 5.55%
Italy 5.45%
Sweden 5.35%
Belgium 5.18%
Portugal 4.41%
Mexico 4.39%
Ireland 4.00%
Australia 3.71%
Switzerland 3.21%
France 3.16%
Finland 2.63%
Germany 2.46%
Denmark 1.89%
Spain 1.84%
Austria 1.75%
Argentina 1.56%
India 1.21%
Brazil 0.93%
Japan 0.84%
South Africa 0.81%
Singapore 0.67%
Taiwan 0.66%
New Zealand 0.63%
Luxembourg 0.59%
British Virgin Islands 0.50%
Botswana 0.49%
Ecuador 0.32%
Pakistan 0.25%
Ghana 0.24%
Greece 0.08%
Colombia 0.01%
Egypt 0.01%
Indonesia 0.00%
Mauritius 0.00%
Peru 0.00%
</TABLE>
[Graphic]
WHAT IS YOUR OUTLOOK FOR INTERNATIONAL SMALL-CAP STOCKS AS WE LEAVE WHAT HAS
BEEN A RELATIVELY WEAK YEAR FOR THE MARKET AND A TRULY EXCELLENT YEAR FOR THE
FUND?
We continue to believe that small-cap investing is all about stock picking and
that, by investing in strong growth stories, the fund will continue to perform
well. Ironically, the majority of small-cap stocks tend to be domestically based
and, therefore, less likely to have negative surprises due to exposure to the
devalued currency markets around the world.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
(CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL SMALL COMPANY FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
International Small Company Fund (Class A Shares) (the "Fund") from February 28,
1996 (start of performance) to November 30, 1997, compared to the
FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.)
(FTSPWMSC).+
[Graphic representation omitted See Appendix #16]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge =
$9,450). The Fund's performance assumes the reinvestment of all dividends and
distributions. The FTSPWMSC has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The FTSPWMSC is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
(CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL SMALL COMPANY FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
International Small Company Fund (Class B Shares) (the "Fund") from February 28,
1996 (start of performance) to November 30, 1997, compared to the
FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.)
(FTSPWMSC).+
[Graphic representation omitted See Appendix #17]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 4.75% contingent deferred sales charge on any redemption
less than 2 years from the purchase date. The maximum contingent deferred sales
charge is 5.50% on any redemption less than 1 year from the purchase date. The
Fund's performance assumes the reinvestment of all dividends and distributions.
The FTSPWMSC has been adjusted to reflect reinvestment of dividends on
securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The FTSPWMSC is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
(CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL SMALL COMPANY FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
International Small Company Fund (Class C Shares) (the "Fund") from February 28,
1996 (start of performance) to November 30, 1997, compared to the
FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.)
(FTSPWMSC).+
[Graphic representation omitted See Appendix #18]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 1.00% on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The FTSPWMSC has
been adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The FTSPWMSC is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--96.2%
AEROSPACE & MILITARY TECHNOLOGY--1.6%
202,000 UMECO PLC $ 1,347,574
145,000 Virgin Express Holdings, ADR 2,392,500
Total 3,740,074
APPLIANCES & HOUSEHOLD DURABLES--1.8%
75,000 Beter Bed Holding NV 1,675,640
1,647,000 Hilasal Mexicana SA, Class A 910,377
40,000 IPSO Industrial Laundry Group 1,693,029
Total 4,279,046
AUTOMOBILE--1.4%
25,650 Athlon Groep 2,194,183
914,000 Consorcio Grupo Dina SA de CV 1,224,082
Total 3,418,265
BANKING--1.4%
225,422 Banco Del Suquia SA 529,935
70,000 Espirito Santo Financial Holding SA, ADR 1,413,125
434,700 HDFC Bank Ltd. 801,059
755,000 Social Security Bank Ltd. 570,969
Total 3,315,088
BEVERAGE & TOBACCO--0.6%
72,725 Baron de Ley 1,297,354
54,600 (a)Jugos de Valle SA, Class B 71,794
Total 1,369,148
BEVERAGES--0.5%
1,091,900 Sechaba Breweries Ltd. 1,159,154
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
BROADCASTING & PUBLISHING--3.0%
234,000 Editor L'Espresso $ 1,045,683
145,000 Elanders AB, Class B 1,877,873
145,000 Elanders AB, Rights 187,787
50,000 (a)Grupo Radio Centro SA - SP, ADR 743,750
63,300 (a)Investec-Consultoria Internacional 1,968,026
6,300 (a)TV Filme, Inc. 28,350
95,000 (a)Xeikon N.V., ADR 1,407,188
Total 7,258,657
BUILDING MATERIALS & COMPONENTS--0.0%
1 Cementos Norte Pacasmayo 1
BUSINESS & PUBLIC SERVICES--8.8%
103,000 ADB-Gruppen Mandator 2,094,282
115,000 Admiral PLC 1,186,706
266,000 CRT Group PLC 1,527,442
295,000 Capita Group PLC 1,639,163
29,400 Creyf's 2,666,520
26,000 Intelligent Polymers Ltd. 494,000
53,500 (a)Lernout and Hauspie Speech Products N.V. 2,564,656
224,000 Morgan & Banks Ltd. 1,498,993
60,000 (a)NICE-Systems Ltd., ADR 2,617,500
6,900 Publicitas Holding SA 1,524,407
170,000 (a)Sapiens International Corp. NV, ADR 1,285,625
218,000 Select Appointments Holdings PLC 2,124,401
Total 21,223,695
CHEMICALS--0.2%
8,000 CIN-Corparacao Industrial do Norte SA 496,781
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
CONSTRUCTION & HOUSING--3.9%
700 (a)Arabian International Construction $ 15,233
43,500 Brisa Auto Estradas de Portugal 1,335,416
780,000 (a)Consorcio Hogar SA 1,604,919
237,000 Corporacion GEO, S.A. de C.V., Class B 1,442,747
135,200 Mota & Companhia 2,137,540
3,550 Sika Finanz AG 1,058,178
600,000 Ultraframe 1,778,413
Total 9,372,446
DATA PROCESSING & REPRODUCTION--6.0%
56,941 (a)Formula Systems (1985) Ltd. 1,882,906
100,000 (a)IONA Technologies PLC, ADR 1,993,750
202,200 JBA Holdings PLC 3,356,904
85,000 (a)JetForm Corp. 1,306,875
75,000 (a)Memco Software, Ltd. 1,728,516
93,000 (a)OptiSystems Solutions Ltd. 598,688
55,000 (a)OptiSystems Solutions Ltd., Warrants 89,375
80,000 Saville Systems Ireland PLC, ADR 2,685,000
41,000 (a)Smallworldwide PLC, ADR 794,375
Total 14,436,389
ELECTRICAL & ELECTRONICS--5.1%
139,300 C-MAC Industries 1,955,980
26,250 ContextVision 459,924
3,270 Leonische Drahtwerke AG 1,095,872
1,700 Micronics Japan Co. Ltd. 31,436
195,000 Partner Tech AB 1,767,791
69,500 (a)Prosolvia AB, Class B 2,511,235
25,380 Simac Techniek 2,892,653
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
ELECTRICAL & ELECTRONICS--CONTINUED
127,500 Toolex Alpha NV $ 1,475,620
Total 12,190,511
ELECTRONIC COMPONENTS, INSTRUMENTS--6.6%
225,000 Accton Technology Corp., GDR 961,875
99,000 Aladdin Knowledge Systems, ADR 1,522,125
47,000 (a)Aptech Ltd. 623,537
60,100 Certicom Corp. 1,645,593
59,500 (a)Creative Technology Ltd. 1,584,188
30,000 Draka Holding 1,335,984
22,000 Fuji Soft ABC, Inc. 768,815
670,000 Intellect Holdings Ltd. 489,536
41,000 (a)Leitch Technology Corp. 1,095,272
72,000 (a)Olicom A/S 2,070,000
85,000 (a)Rand Technology 1,366,588
1,815 Sartorius AG-Vorzug 504,310
21,800 Singulus Technologies AG 964,219
36,800 Union Tool 980,372
Total 15,912,414
ENERGY - OIL & GAS--3.0%
40,000 Bouygues Offshore SA 1,775,278
488,000 (a)Cultus Petroleum NL 866,400
29,300 Discoverer ASA 1,181,550
214,000 (a)ERG SPA 811,995
197,000 (a)SOCO International PLC 1,290,928
1,140,000 (a)Tap Oil 1,323,363
Total 7,249,514
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
ENERGY EQUIPMENT & SERVICES--0.9%
2,600,000 (a)Japan Power Generation Ltd. $ 590,829
1,260,000 (a)Ocean Rig ASA 1,576,885
Total 2,167,714
ENERGY SOURCES--0.3%
113,700 Hurricane Hydrocarbons Ltd., Class A 738,389
FINANCIAL SERVICES--1.5%
470,000 DBS Management PLC 1,508,188
24,500 DIS Deutsche Industrie Service 958,605
35,000 Drake Beam Morin Japan, Inc. 220,764
750,000 (a)ICICI Banking Corp. 831,186
Total 3,518,743
FOOD & BEVERAGE--0.4%
285,000 Grupo Continental SA 929,932
FOOD & HOUSEHOLD PRODUCTS--3.0%
9,300 Chipita International 179,344
60,700 De Boer Unigro 2,061,717
122,310 Importadora y Exportadora de la Patagonia 1,786,378
10,000 (a)Industrias Alimenticias Noel 34,377
35,000 (a)Leon De Bruxelles 2,377,484
5,899,744 (a)Supermercados La Favorita 770,451
Total 7,209,751
FOOD PROCESSING--3.0%
597,500 (a)Autogrill SPA 2,720,217
100 (a)Eastern Co. 2,318
50,000 Elite Industries Ltd. 1,300,096
37,400 (a)Tele Pizza SA 3,092,630
Total 7,115,261
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
FOREST PRODUCTS & PAPER--1.1%
56,300 Cia Celulose Caima $ 752,958
176,000 Corticeira Amorim SA 2,002,219
Total 2,755,177
HEALTH & PERSONAL CARE--2.8%
154,000 Biocompatibles International PLC 1,474,714
55,000 Biovail Corp. International 1,698,125
685,000 Corporativo Fragua SA 967,432
685 Disetronic Holdings AG 1,568,611
230,000 (a)SHL Group PLC 1,013,847
Total 6,722,729
HOUSEHOLD APPLIANCES--0.6%
100,000 Carrier Aircon Ltd. 634,021
75,000 Office Specialty 737,178
Total 1,371,199
INSURANCE--0.3%
200,000 Charles Taylor Group PLC 785,339
LEISURE & TOURISM--0.9%
3,474 Infogrames Entertainment 536,109
180 New Mauritius Hotels LTD 349
290,000 Regent Inns PLC 1,601,585
Total 2,138,043
MACHINERY & ENGINEERING--5.3%
2,600 KSB AG 604,480
43,465 Mirgor SACIFIA, Class C 1,397,040
49,000 Nedcon Groep NV 2,576,611
25,875 PT Komatsu Indonesia 2,838
101,000 Partek Corp. 1,873,616
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
MACHINERY & ENGINEERING--CONTINUED
214,000 (a)Rocla OY $ 2,175,584
149,000 Santasalo -- JOT Group 2,207,884
18,000 (a)Schoeller-Bleckmann Oilfield Equipment AG 2,001,692
Total 12,839,745
MANUFACTURING--5.6%
124,000 Bespak PLC 1,467,013
256,400 DataTec Ltd. 1,931,510
163,000 Games Workshop Group 1,734,332
608 Gurit Heberlein AG 1,910,394
88,000 Mettler Toledo International, Inc., ADR 1,573,000
22,000 Semperit AG Holdings 2,162,859
105,500 Tomra Systems ASA 2,714,006
Total 13,493,114
MERCHANDISING--1.6%
254,800 (a)CSP International Industria Calze SPA 2,876,079
3,500 Panvel SA-Drogarias E Farmacias 48,905
127,000 Watson & Philip PLC 990,946
Total 3,915,930
MINING--1.1%
523,200 Petrolia Drilling ASA 2,691,882
MISCELLANEOUS--0.5%
50,000 Gemstar International Group Ltd. 1,187,500
MISCELLANEOUS MATERIALS & COMMODITIES--0.6%
955,000 Freedom Furniture Ltd. 1,467,273
MULTI-INDUSTRY--1.6%
571,000 Robert Walters PLC 3,934,599
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
PHARMACEUTICALS--0.5%
50,000 (a)Genset $ 1,118,750
RECREATION, OTHER CONSUMER GOODS--0.2%
79,000 Corporacion Interamericana de Entretenimiento S.A. 543,435
TELECOMMUNICATIONS--7.8%
901,900 (a)AAPT Telecommunications 1,422,645
11,000 ASE Test Ltd. 616,000
3,606,000 (a)Biper S.A. 1,448,810
51,000 CGI Group, Inc. 1,439,393
292,000 (a)Colt Telecom Group PLC 3,190,739
78,500 Ericsson 3,044,467
150,000 Esat Telecom Group PLC, ADR 2,128,125
96,600 Mas Technology Ltd., ADR 1,497,300
171,000 (a)Mitel Corp 1,404,641
241,700 Tandberg Television 2,419,890
Total 18,612,010
TEXTILES & APPAREL--3.6%
3,011 Berginvest 463,428
17,700 (a)Groupe Andre SA 1,724,036
491,000 (a)Grupo Covarra SA de CV 573,884
1,685 Picanol 1,148,511
329,800 (a)Simint SPA 2,472,221
105,000 (a)Tefron Ltd., ADR 2,205,000
Total 8,587,080
TRANSPORTATION - AIRLINES--1.1%
101,900 (a)Ryanair Holdings PLC, ADR 2,725,825
TRANSPORTATION - ROAD & RAIL--2.4%
71,000 ASG AB, Class B 1,526,387
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
TRANSPORTATION - ROAD & RAIL--CONTINUED
3,250 DSV, De Sammensluttede Vognmad AS $ 2,420,893
20,125 Sixt AG 1,723,207
Total 5,670,487
TRANSPORTATION - SHIPPING--3.9%
620,000 American Port Services 1,659,683
73,500 (a)Det Sondenfjelds-Norske Dampskibsselskab, Class A 1,441,096
510,000 Farstad Shipping 2,943,097
480,000 Frontline Ltd. 2,322,774
50,000 (a)Seateam Technology AS 886,476
Total 9,253,126
UTILITIES--1.0%
85,000 (a)Industri-Matematik International Corp. 2,316,250
UTILITIES - ELECTRICAL & GAS--0.7%
468,131 Novus Petroleum Ltd. 1,422,503
564,000 (a)Petroz NL 358,168
Total 1,780,671
TOTAL COMMON STOCKS (IDENTIFIED COST $219,757,844) 231,011,137
PREFERRED STOCKS--1.6%
AUTOMOBILE--0.2%
3,000,000 Marcopolo SA, Preference 378,617
CONSTRUCTION & HOUSING--0.3%
210,000 Construtora Sultepa SA, Preference 738,303
MISCELLANEOUS MATERIALS & COMMODITIES--0.1%
4,600,000 SA Mineracao da Trinidade 120,256
MULTI-INDUSTRY--0.8%
225,000 Lusomundo Sociedade Gestora de Participacoes Sociais SA, 1,809,239
Pfd.
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
SHARES OR VALUE IN
PRINCIPAL U.S.
AMOUNT DOLLARS
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
TELECOMMUNICATIONS--0.3%
1,900,000 Companhia Telefonica da Borda do Campo, Preference $ 716,803
TEXTILES & APPAREL--0.1%
47,200 Confeccoes Guararapes SA, Pfd. 182,963
115,000,000(a)Texpar SA, Preference 1,037
Total 184,000
TOTAL PREFERRED STOCKS (IDENTIFIED COST $4,216,277) 3,947,218
(B)REPURCHASE AGREEMENT--1.4%
$ 3,250,000 BT Securities Corporation, 5.73%, dated 11/28/1997,
due 12/1/1997 (AT AMORTIZED COST) 3,250,000
TOTAL INVESTMENTS (IDENTIFIED COST $227,224,121)(C) $ 238,208,355
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $227,832,507.
The net unrealized appreciation of investments on a federal tax basis amounts to
$10,375,848 which is comprised of $19,524,569 appreciation and $9,148,721
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($240,058,173) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR --American Depository Receipt
GDR --Global Depository Receipt
PLC --Public Limited Company
SA --Support Agreement
SPA --Standby Purchase Agreement
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $227,224,121, and
tax cost $227,832,507) $ 238,208,355
Cash 230,838
Cash denominated in foreign currency (identified and tax cost $8,131) 8,001
Income receivable 88,779
Receivable for investments sold 4,702,645
Receivable for shares sold 1,246,748
Deferred organizational costs 39,489
Total assets 244,524,855
LIABILITIES:
Payable for investments purchased $ 3,443,358
Payable for shares redeemed 740,465
Payable for taxes withheld 4,137
Net payable for foreign exchange contracts 171
Accrued expenses 278,551
Total liabilities 4,466,682
NET ASSETS for 16,981,378 shares outstanding $ 240,058,173
NET ASSETS CONSIST OF:
Paid in capital $ 231,982,846
Net unrealized appreciation of investments and translation of assets and liabilities
in
foreign currency 10,975,324
Accumulated net realized loss on investments and foreign currency transactions (2,899,997)
Total Net Assets $ 240,058,173
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($91,706,777 / 6,433,370 shares outstanding) $14.25
Offering Price Per Share (100/94.50 of $14.25)* $15.08
Redemption Proceeds Per Share $14.25
CLASS B SHARES:
Net Asset Value Per Share ($120,939,491 / 8,597,933 shares outstanding) $14.07
Offering Price Per Share $14.07
Redemption Proceeds Per Share (94.50/100 of $14.07)** $13.30
CLASS C SHARES:
Net Asset Value Per Share ($27,411,905 / 1,950,075 shares outstanding) $14.06
Offering Price Per Share $14.06
Redemption Proceeds Per Share (99.00/100 of $14.06)** $13.92
</TABLE>
* See "Investing in the Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $80,894) $ 1,099,076
Interest 304,623
Total income 1,403,699
EXPENSES:
Investment advisory fee $ 1,677,789
Administrative personnel and services fee 185,588
Custodian fees 379,073
Transfer and dividend disbursing agent fees and expenses 211,392
Directors'/Trustees' fees 2,418
Auditing fees 17,855
Legal fees 7,711
Portfolio accounting fees 93,717
Distribution services fee--Class B Shares 508,504
Distribution services fee--Class C Shares 109,351
Shareholder services fee--Class A Shares 129,606
Shareholder services fee--Class B Shares 169,501
Shareholder services fee--Class C Shares 36,450
Share registration costs 107,077
Printing and postage 45,857
Insurance premiums 4,263
Taxes 779
Miscellaneous 8,105
Total expenses 3,695,036
Waivers and reimbursements--
Waiver of investment advisory fee (231,231)
Net expenses 3,463,805
Net operating loss (2,060,106)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments and foreign currency transactions
(net of foreign taxes withheld of $404) (4,892,895)
Net change in unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 8,258,008
Net realized and unrealized gain on investments and foreign currency transactions 3,365,113
Change in net assets resulting from operations $ 1,305,007
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net operating loss $ (2,060,106) $ (97,243)
Net realized loss on investments and foreign currency
transactions ($2,291,612 and $30,327, respectively, as computed
for federal tax purposes) (4,892,895) (92,852)
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 8,258,008 2,717,316
Change in net assets resulting from operations 1,305,007 2,527,221
SHARE TRANSACTIONS--
Proceeds from sale of shares 238,766,808 44,965,507
Cost of shares redeemed (36,173,268) (11,333,102)
Change in net assets resulting from share transactions 202,593,540 33,632,405
Change in net assets 203,898,547 36,159,626
NET ASSETS:
Beginning of period 36,159,626 --
End of period $ 240,058,173 $ 36,159,626
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.26 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.11) (0.02)
Net realized and unrealized gain on investments and foreign
currency transactions 2.10 2.28
Total from investment operations 1.99 2.26
NET ASSET VALUE, END OF PERIOD $14.25 $12.26
TOTAL RETURN(B) 16.23% 22.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.12% 1.97%*
Net operating loss (1.08%) (0.48%)*
Expense waiver/reimbursement(c) 0.21% 3.38%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $91,707 $16,399
Average commission rate paid(d) $0.0006 $0.0006
Portfolio turnover 286% 174%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.20 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.12) (0.04)
Net realized and unrealized gain on investments and foreign
currency transactions 1.99 2.24
Total from investment operations 1.87 2.20
NET ASSET VALUE, END OF PERIOD $14.07 $12.20
TOTAL RETURN(B) 15.33% 22.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.87% 2.72%*
Net operating loss (1.81%) (1.61%)*
Expense waiver/reimbursement(c) 0.17% 3.38%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $120,939 $16,721
Average commission rate paid(d) $0.0006 $0.0006
Portfolio turnover 286% 174%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.19 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.12) (0.05)
Net realized and unrealized gain on investments and foreign
currency transactions 1.99 2.24
Total from investment operations 1.87 2.19
NET ASSET VALUE, END OF PERIOD $14.06 $12.19
TOTAL RETURN(B) 15.34% 21.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.87% 2.72%*
Net operating loss (1.85%) (1.58%)*
Expense waiver/reimbursement(c) 0.17% 3.38%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $27,412 $3,040
Average commission rate paid(d) $0.0006 $0.0006
Portfolio turnover 286% 174%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. ORGANIZATION
World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of eight portfolios. The
financial statements included herein are only those of Federated International
Small Company Fund (the "Fund"), a diversified portfolio. The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The Fund offers three classes of shares:
Class A Shares, Class B Shares, and Class C Shares. The investment objective of
the Fund is to provide long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- Foreign equity securities are valued at the last sale
price reported in the market in which they are primarily traded. If no sale on
the recognized exchange is reported or the security is traded over-the-counter,
the foreign securities are valued at the mean between the last closing bid and
asked prices. Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term foreign and domestic securities
with remaining maturities of sixty days or less at the time of purchase may be
valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS -- It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS -- Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions and net operating losses. The following reclassifications have been
made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
UNDISTRIBUTED NET
INVESTMENT
ACCUMULATED INCOME/ACCUMULATED
NET REALIZED DISTRIBUTIONS IN EXCESS OF
PAID-IN CAPITAL GAIN/LOSS NET INVESTMENT INCOME
<S> <C> <C>
$(4,053,004) $1,992,898 $2,060,106
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
At November 30, 1997, the Fund, for federal tax purposes, had a capital loss
carryforward of $2,291,612, which will reduce the Fund's taxable income arising
from future net realized gains on investments, if any, to the extent permitted
by the code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal tax. Pursuant to the code, such capital loss carryforward
will expire in 2005.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS -- The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency exchange
transactions. Purchased contracts are used to acquire exposure to foreign
currencies; whereas, contracts to sell are used to hedge the Fund's securities
against currency fluctuations. Risks may arise upon entering these transactions
from the potential inability of counterparts to meet the terms of their
commitments and from unanticipated movements in security prices or foreign
exchange rates. The foreign currency transactions are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the settlement date.
At November 30, 1997, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
PURCHASED DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Australian Dollar 12/01/97 87,330 $60,258 $59,634 $(624)
Australian Dollar 12/02/97 75,780 51,985 51,746 (239)
Spanish Peseta 12/01/97 10,116,337 67,918 67,845 (73)
Japanese Yen 12/01/97 1,613,520 12,645 12,643 (2)
CONTRACTS SOLD
Argentine Peso 12/01/97 131,706 $131,574 $131,754 $(180)
Hong Kong Dollar 12/01/97 94,360 12,206 12,206 --
Indonesian Rupiah 12/04/97 18,502,079 5,028 5,073 (45)
Italian Lira 12/01/97 449,859,200 262,003 260,401 1,602
Italian Lira 12/02/97 682,866,487 395,177 395,278 (101)
Italian Lira 12/03/97 18,643,270 10,770 10,792 (22)
Mexican Peso 12/01/97 3,101,258 377,053 377,581 (528)
Portuguese Escudo 12/02/97 6,639,118 36,884 36,843 41
TOTAL UNREALIZED
DEPRECIATION $(171)
</TABLE>
FOREIGN CURRENCY TRANSLATION -- The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies ("FC") are translated into U.S. dollars based on the rate of exchange
of such currencies against U.S. dollars on the date of valuation. Purchases and
sales of securities and income and expenses are translated at the rate of
exchange quoted on the respective date that such transactions are recorded.
Differences between income and expense amounts recorded and collected or paid
are adjusted when reported by the custodian bank. The Fund does not isolate that
portion of the results of operations resulting from changes in foreign exchange
rates on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ from
those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1997, par value shares ($0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 405,000,000
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 6,748,444 $ 98,446,634 2,313,613 $ 25,684,395
Shares redeemed (1,652,514) (23,754,721) (976,173) (10,868,944)
Net change resulting from Class A Share
transactions 5,095,930 $ 74,691,913 1,337,440 $ 14,815,451
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 7,830,646 $ 112,172,634 1,398,394 $ 16,261,633
Shares redeemed (603,585) (8,739,869) (27,522) (323,940)
Net change resulting from Class B Share
transactions 7,227,061 $ 103,432,765 1,370,872 $ 15,937,693
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(b) For the period from February 28, 1996 (date of initial public offering) to
November 30, 1996.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,957,983 $ 28,147,540 261,457 $ 3,019,479
Shares redeemed (257,229) (3,678,678) (12,136) (140,218)
Net change resulting from Class C Share
transactions 1,700,754 $ 24,468,862 249,321 $ 2,879,261
Net change resulting from share
transactions 14,023,745 $ 202,593,540 2,957,633 $ 33,632,405
</TABLE>
(b) For the period from February 28, 1996 (date of initial public offering) to
November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.25% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Class A Shares, Class B Shares, and Class C
Shares. The Plan provides that the Fund may incur distribution expenses
according to the following schedule annually, to compensate FSC.
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
Class A Shares did not incur a distribution services fee for the period ended
November 30, 1997, and has no present intention of paying or accruing the
distribution services fee.
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC"), serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES -- Organizational and start-up administrative service
expenses of $47,932 were borne initially by the Adviser. The Fund has reimbursed
the Adviser for these expenses. These expenses have been deferred and are being
amortized over the five-year period following the Fund's effective date. For the
year ended November 30, 1997, the Fund expensed $5,870 of organizational and
start-up administrative service expenses.
GENERAL -- Certain Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $558,253,383
SALES $362,966,952
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of countries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
COUNTRY NET ASSETS COUNTRY NET ASSETS
<S> <C> <C> <C>
Argentina 1.55% Ireland 3.97%
Australia 3.69 Italy 5.40
Austria 1.73 Japan 0.83
Belgium 5.14 Luxembourg 0.59
Botswana 0.48 Mauritius 0.00
Brazil 0.92 Mexico 4.36
British Virgin Islands 0.49 Netherlands 5.92
Canada 5.78 New Zealand 0.62
Colombia 0.01 Norway 7.57
Denmark 1.87 Pakistan 0.25
Ecuador 0.32 Peru 0.00
Egypt 0.01 Portugal 4.37
Finland 2.61 Singapore 0.66
France 3.13 South Africa 0.80
Germany 2.44 Spain 1.83
Ghana 0.24 Sweden 5.31
Greece 0.07 Switzerland 3.18
India 1.20 Taiwan 0.66
Indonesia 0.00 United Kingdom 14.33
Israel 5.51
</TABLE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
To the Directors and Shareholders of WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated International Small Company Fund (a
portfolio of World Investment Series, Inc.) as of November 30, 1997, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated International Small Company Fund of World Investment Series, Inc. at
November 30, 1997, and the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 20, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 981487838
Cusip 981487820
Cusip 981487812
G01968-01 (1/98)
[Graphic]
[Graphic] Federated Investors
Federated Latin American Growth Fund
2ND ANNUAL REPORT NOVEMBER 30, 1997
ESTABLISHED 1996
PRESIDENT'S MESSAGE
Dear Fellow Shareholder:
I am pleased to present the second Annual Report to Shareholders for Federated
Latin American Growth Fund. This report contains information about the fund's
fiscal year reporting period from December 1, 1996 through November 30, 1997.
The report begins with a commentary by the fund's portfolio manager, Alexandre
de Bethmann, Vice President of Federal Global Research Corp., which covers
international economic and market conditions and fund strategy. Following his
commentary are a complete list of the fund's investments and the financial
statements.
This Latin American growth fund brings to shareholders significant long-term
opportunities from an extremely well-researched portfolio of approximately 60
stocks in seven Latin American countries, whose median market capitalization is
over $2 billion. At the end of the reporting period, the fund's assets surpassed
the $25 million mark.*
The first half of the fund's fiscal year was outstanding as the Latin American
market overall delivered a total return of more than 30%--the highest return of
any region in the world. While the market was unable to sustain that pace for
the rest of the year, the fund produced a strong total return through net asset
value increase, income, and capital gains. Share class performance highlights
are as follows:**
TOTAL CAPITAL NET ASSET
RETURN INCOME GAINS VALUE INCREASE
Class A Shares 20.76% $0.08 $0.41 $11.56 to $13.39 = 16%
Class B Shares 19.72% $0.05 $0.41 $11.50 to $13.24 = 15%
Class C Shares 19.97% $0.03 $0.41 $11.48 to $13.27 = 16%
Remember, adding to your account on a regular basis and reinvesting your annual
dividends in additional shares is a convenient way to "pay yourself first" and
enjoy the benefit of compounding.+
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns based on offering price for Class A, B, and C
Shares for the 12-month reporting period were 14.15%, 14.03%, and 18.97%,
respectively.
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
We trust you are satisfied with your investment in Federated Latin American
Growth Fund. We will continue to keep you up-to-date on the details of your
investment on a regular basis.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1998
INVESTMENT REVIEW
[Graphic]
Alexandre de Bethmann
Vice President
Federated Global Research Corp.
[Graphic]
OVERALL, THE FUND'S FISCAL YEAR WAS A VERY STRONG PERIOD FOR LATIN AMERICA.
AFTER DELIVERING THE HIGHEST DOLLAR RETURN OF ANY WORLD REGION DURING THE FIRST
HALF OF THE FUND'S FISCAL YEAR, THE MARKET WAS UNABLE TO SUSTAIN THIS PACE LATER
IN THE REPORTING PERIOD. WHAT ARE YOUR COMMENTS?
The Latin American economies are highly linked in the new global environment and
this is reflected in the capital markets. The Asian currency crisis triggered
the weaknesses of the Brazilian current account deficit and brought the market
down in an environment of low liquidity. Brazil's situation had a contagion
effect on the other Latin American markets. The positive aspect of this
situation is that it led Brazil to implement important structural reforms in a
timely manner, which avoids the risk of deeper future problems.
[Graphic]
IN THIS POSITIVE ENVIRONMENT, HOW WELL DID FEDERATED LATIN AMERICAN GROWTH
FUND PERFORM COMPARED TO THE EMERGING MARKETS OVERALL AND THE UNIVERSE OF
LATIN AMERICAN GROWTH FUNDS?
In the 12-month reporting period, the fund delivered a total return based on net
asset value of 20.76% for Class A Shares, 19.72% for Class B Shares, and 19.97%,
for Class C Shares.* The fund's returns, while strong, were less than the Morgan
Stanley Capital International Latin American-Free Index's total return of
27.08%.** In comparison, the emerging markets' 12-month total return was
(11.74%), as measured by the Morgan Stanley Capital International Emerging
Markets Free Index.**
For the year, the Federated Latin American Growth Fund underperformed the index
by 6.32%. This was a direct result of the lack of liquidity of some Brazilian
holdings during the severe market downturn.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns based on offering price for Class A, B, and C
Shares for the 12-month reporting period were 14.15%, 14.03%, and 18.97%,
respectively.
** Morgan Stanley Capital International Latin American-Free Index is a market
value-weighted average of the performance of securities listed on the stock
exchanges of seven countries in the Latin American region. Morgan Stanley
Capital International Emerging Markets Free Index is a market
capitalization-weighted foreign securities index, which is used to measure
the performance of emerging markets in Europe, Asia, Latin America, and the
Middle East/Africa. These indices are unmanaged, and investments cannot be
made in an index.
[Graphic]
DURING THE FIRST HALF OF THE FUND'S FISCAL YEAR, YOU MAINTAINED THE FUND'S
COUNTRY WEIGHTING CLOSE TO THE INDEX WHILE FOCUSING ON SUPERIOR STOCK SELECTION.
DID THAT STRATEGY REMAIN IN PLACE THROUGHOUT THE FISCAL YEAR?
Until November, we maintained the asset allocation close to the index. However,
we took the opportunity implied by the crisis to restructure our portfolio more
according to the current global market conditions. Late in the fund's fiscal
year, we rebalanced the portfolio, increasing our exposure to Mexico and
Argentina--the countries we expect will drive the region's growth in 1998.
[Graphic]
WHAT COUNTRIES WERE REPRESENTED IN THE PORTFOLIO AS OF NOVEMBER 30, 1997?
The portfolio was diversified across the following countries as of November 30,
1997:
PERCENTAGE OF
COUNTRY PORTFOLIO
Mexico 35.98%
Brazil 33.56
Argentina 10.75
Chile 6.60
Venezuela 3.61
Colombia 2.15
Peru 0.64
WHAT WERE THE FUND'S TOP TEN HOLDINGS?
As of November 30, 1997, the top ten holdings were as follows:
PERCENTAGE
TOP HOLDINGS OF NET
COMPANY COUNTRY ASSETS INDUSTRY
Telecomunicacoes de
Sao Paulo SA, Preference Brazil 4.04% Telecommunications
Petroleo Brasileiro SA,
Preference Brazil 3.92 Energy Sources
Fomento Economico
Mexicano, SA de C.V.,
Class B Mexico 3.72 Beverages
Tubos de Acero de Mexico
SA, ADR Mexico 3.52 Metals - Steel
Grupo Financiero Bancomer
S.A. de C.V., Class B Mexico 3.38 Banking
Cifra SA de CV, Class B Mexico 3.36 Merchandising
Telecomunicacoes
Brasileiras SA Brazil 3.34 Telecommunications
Grupo Carso SA de CV Mexico 3.27 Conglomerate
Cesp Pn Brazil 3.21 Utilities
Sanluis Corporacion SA
de CV Mexico 3.03 Automobiles
TOTAL PERCENTAGE OF
PORTFOLIO NET ASSETS 34.79%
[Graphic]
CAN YOU DISCUSS SOME OF THE FUND'S MOST RECENT PURCHASES?
We purchased TELESP, which is one of the Brazilian telecommunications companies
most likely to rapidly benefit from the privatization process, due to its
excellent concession area (the city of Sao Paulo), and the fact that is the only
stand-alone company among the Telebras group. In Mexico, we increased our
exposure to retail companies, like CIFRA and ELEKTRA, which are expected to
benefit from the continued consumption recovery.
[Graphic]
ALL IN ALL, 1997 WAS A GOOD YEAR FOR LATIN AMERICA, THANKS TO EXTREMELY
STRONG GROWTH EARLY IN THE REPORTING PERIOD. WHERE DOES THE MARKET APPEAR TO
BE HEADED AS WE ENTER 1998?
We think that Latin America can deliver another 20% return in 1998. However, we
perceive a difficult competitive environment. In general, we are staying away
from the sectors--steel, petrochemicals and pulp and paper-- that we think will
be most affected by increased and highly priced competitive Asian exports.
WHERE IN THE WORLD SHOULD YOU INVEST?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND
[Graphic]
FEDERATED EMERGING MARKETS FUND
[Graphic]
FEDERATED EUROPEAN GROWTH FUND
[Graphic]
FEDERATED INTERNATIONAL EQUITY FUND
[Graphic]
FEDERATED INTERNATIONAL GROWTH FUND
[Graphic]
FEDERATED INTERNATIONAL HIGH INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL SMALL COMPANY FUND
[Graphic]
FEDERATED LATIN AMERICAN GROWTH FUND
[Graphic]
FEDERATED WORLD UTILITY FUND
Employ highly qualified, experienced managers in global investing to select
countries and companies outside the U.S. for long-term growth potential.
Call your investment representative to buy shares of 8 international equity
funds and 2 international income funds from Federated Investors.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL 1-800-341-7400 TO
ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU INVEST.
Foreign investing involves special risks including currency risks, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
FEDERATED LATIN AMERICAN GROWTH FUND
(CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED LATIN AMERICAN GROWTH FUND (CLASS A
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
Latin American Growth Fund (Class A Shares) (the "Fund") from February 28, 1996
(start of performance) to November 30, 1997 compared to the Morgan Stanley
Capital International Latin American-Free Index
(MGEUEGFL).+
"Graphic representation "19" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge
= $9,450). The Fund's performance assumes the reinvestment of all dividends
and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MGEUEGFL is a market value-weighted average of the performance of
securities listed on the stock exchanges of seven countries in the
Latin-American region. The MGEUEGFL is not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires
to be reflected in the Fund's performance. The MGEUEGFL has been adjusted to
reflect reinvestment of dividends on securities in the index.
The index is unmanaged.
FEDERATED LATIN AMERICAN GROWTH FUND
(CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED LATIN AMERICAN GROWTH FUND (CLASS B
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
Latin American Growth Fund (Class B Shares) (the "Fund") from February 28, 1996
(start of performance) to November 30, 1997 compared to the Morgan Stanley
Capital International Latin American-Free Index
(MGEUEGFL).+
"Graphic representation "20" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 4.75% on any
redemption less than 2 years from the purchase date. The maximum contingent
deferred sales charge is 5.50% on any redemption less than 1 year from the
purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MGEUEGFL is a market value-weighted average of the performance of
securities listed on the stock exchanges of seven countries in the
Latin-American region. The MGEUEGFL is not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires
to be reflected in the Fund's performance. The MGEUEGFL has been adjusted to
reflect reinvestment of dividends on securities in the index.
The index is unmanaged.
FEDERATED LATIN AMERICAN GROWTH FUND
(CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED LATIN AMERICAN GROWTH FUND (CLASS C
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
Latin American Growth Fund (Class C Shares) (the "Fund") from February 28, 1996
(start of performance) to November 30, 1997 compared to the Morgan Stanley
Capital International Latin American-Free Index
(MGEUEGFL).+
"Graphic representation "21" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 1.00% on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MGEUEGFL is a market value-weighted average of the performance of
securities listed on the stock exchanges of seven countries in the
Latin-American region. The MGEUEGFL is not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires
to be reflected in the Fund's performance. The MGEUEGFL has been adjusted to
reflect reinvestment of dividends on securities in the index.
The index is unmanaged.
FEDERATED LATIN AMERICAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--69.0%
AUTOMOBILE--3.0%
102,000 Sanluis Corporacion SA de CV $ 769,952
BANKING--8.1%
14,200 Banco Ganadero SA, Class C, ADR 285,775
9,300 Banco Industrial Colombiano, ADR 134,850
22,700 Banco Rio de la Plata SA, ADR 285,169
9,900 Banco de A. Edwards, ADR 173,250
1,485,000 Grupo Financiero Bancomer, S.A. de C.V., Class B 858,799
11,000 (a)Unibanco Uniao de Bancos Brasileiros SA, ADR 316,250
Total 2,054,093
BEVERAGE & TOBACCO--8.4%
84,400 (a)Jugos de Valle SA, Class B 110,978
114,700 Fomento Economico Mexicano, SA de C.V., Class B 945,418
18,800 Pan American Beverage, Class A 643,900
34,500 Quilmes Industrial SA, ADR 448,500
Total 2,148,796
BROADCASTING & PUBLISHING--0.2%
9,700 (a)TV Filme, Inc. 43,650
BUILDING MATERIALS & COMPONENTS--2.1%
110,500 Cemex SA, Class B 546,210
CONGLOMERATE--5.3%
22,304 Compania Naviera Perez Companc SA, Class B 159,309
126,000 Grupo Carso SA de CV 831,460
11,500 Grupo Elektra S.A. de C.V., GDR 356,500
Total 1,347,269
</TABLE>
FEDERATED LATIN AMERICAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
CONSTRUCTION & HOUSING--3.7%
240,000 (a)Consorcio Hogar SA $ 493,821
29,300 Empresas ICA Sociedad Controladora S.A., ADR 454,150
Total 947,971
ENERGY EQUIPMENT & SERVICES--1.8%
17,900 (b)Chilectra S.A., ADR 446,784
ENERGY SOURCES--1.8%
14,000 YPF Sociedad Anonima, ADR 469,875
FINANCIAL SERVICES--0.3%
3,524 Credicorp Ltd. 64,313
FOOD & HOUSEHOLD PRODUCTS--2.1%
3,000 (a)Distribucion y Servicio, ADR 52,312
12,000 Grupo Industrial Bimbo SA de CV, Class A 97,888
39,000 (a)Industrias Alimenticias Noel 134,072
19,000 (a)Supermercados Unimarc SA, ADR 247,000
Total 531,272
FOREST PRODUCTS & PAPER--1.2%
22,000 Aracruz Cellulose, ADR 316,250
MERCHANDISING--3.4%
398,500 Cifra SA de CV, Class B 853,911
METALS - NON FERROUS--0.8%
12,000 Madeco SA, ADR 202,500
METALS - STEEL--5.0%
3,334 International Briquettes Holding 53,136
121,218 Siderca S.A., Class A 334,684
40,500 (a)Tubos de Acero de Mexico SA, ADR 896,063
Total 1,283,883
</TABLE>
FEDERATED LATIN AMERICAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
MISCELLANEOUS MATERIALS & COMMODITIES--2.3%
138,000 Vitro SA $ 591,417
TELECOMMUNICATIONS--12.6%
726,000 Biper S.A. 291,690
2,600 CPT Telefonica del Peru S.A., Class B, ADR 54,600
8,600 Compania Anonima Nacional Telefonos de Venezuela, Class 339,700
D, ADR
5,100 Compania Telecomunicacion Chile, ADR 138,019
10,400 Telecom Argentina S.A., ADR 319,150
9,164,000 Telecomunicacoes Brasileiras SA 850,890
2,300 Telecomunicacoes Brasileiras SA, ADR 240,063
180,686 Telecomunicacoes Do Rio Janiero SA, Rights 2,484
130,335 Telecomunicacoes de Sao Paulo SA, Rights 2,467
11,900 Telefonica de Argentina S.A., ADR 393,444
11,400 Telefonos de Mexico, Class L, ADR 564,300
Total 3,196,807
UTILITIES - ELECTRICAL & GAS--6.7%
91,882 Citicorp Equity In 367,662
5,200,000 Companhia de Electricidade do Estado da Bahia 295,321
499,553 Electricid Caracas 592,166
14,900 Enersis S.A., ADR 445,137
Total 1,700,286
WHOLESALE & INTERNATIONAL TRADE--0.2%
49,297 Enrique Ferreyros S.A. 47,070
TOTAL COMMON STOCKS (IDENTIFIED COST $16,577,674) 17,562,309
PREFERRED STOCKS--26.0%
ENERGY SOURCES--3.9%
4,550,000 Petroleo Brasileiro SA, Preference 996,710
</TABLE>
FEDERATED LATIN AMERICAN GROWTH FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
FOREST PRODUCTS & PAPER--1.4%
16,900,000 Votorantim Celulose e Papel SA, Preference $ 365,636
MISCELLANEOUS MATERIALS & COMMODITIES--1.5%
14,700,000 SA Mineracao da Trinidade 384,296
TELECOMMUNICATIONS--8.0%
4,900,000 Telecomunicacoes Brasileiras SA, Preference 503,561
4,660,000 Telecomunicacoes Do Rio Janiero SA, Preference 491,499
3,901,433 Telecomunicacoes de Sao Paulo SA, Preference 1,027,006
Total 2,022,066
UTILITIES - ELECTRICAL & GAS--11.2%
1,570,000 Centrais Eletricas Brasileiras SA, Preference, Series B 764,266
12,500,000 Cesp Cia Energ Sp 816,957
11,525,000 Companhia Energetica de Minas Gerais, Preference 555,835
3,900,000 (a)Eletropaulo-Electricidade de Sao Paulo SA, 706,662
Preference, Class B
Total 2,843,720
TOTAL PREFERRED STOCKS (IDENTIFIED COST $6,921,240) 6,612,428
CORPORATE BONDS--0.0%
MINING--0.0%
$ 5,800 Companhia Vale Do Rio Doce, Conv. Deb., 12/31/1999
(IDENTIFIED COST $58) 52
(C)REPURCHASE AGREEMENT--6.6%
1,690,000 BT Securities Corp., 5.73%, dated 11/28/1997, due
12/1/1997
(AT AMORTIZED COST) 1,690,000
TOTAL INVESTMENTS (IDENTIFIED COST $25,188,972)(D) $ 25,864,789
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $446,784 which represents 1.8% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $25,291,679. The
net unrealized appreciation of investments on a federal tax basis amounts to
$573,110 which is comprised of $2,156,883 appreciation and $1,583,773
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($25,441,821) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR --American Depository Receipt
GDR --Global Depository Receipt
SA --Support Agreement
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $25,188,972 and tax $ 25,864,789
cost $25,291,679)
Income receivable 19,175
Receivable for investments sold 810,757
Receivable for shares sold 158,897
Deferred organizational costs 43,629
Total assets 26,897,247
LIABILITIES:
Payable for investments purchased $939,295
Payable for shares redeemed 457,532
Payable to Bank 13,133
Payable for taxes withheld 2,549
Net payable for foreign exchange contracts 137
Accrued expenses 42,780
Total liabilities 1,455,426
NET ASSETS for 1,908,492 shares outstanding $ 25,441,821
NET ASSETS CONSIST OF:
Paid in capital $ 26,178,381
Net unrealized appreciation of investments and translation of assets and
liabilities in
foreign currency 675,619
Accumulated net realized loss on investments and foreign currency transactions (1,412,179)
Total Net Assets $ 25,441,821
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($14,847,302 / 1,108,581 shares outstanding) $13.39
Offering Price Per Share (100/94.50 of $13.39)* $14.17
Redemption Proceeds Per Share $13.39
CLASS B SHARES:
Net Asset Value Per Share ($8,813,976 / 665,741 shares outstanding) $13.24
Offering Price Per Share $13.24
Redemption Proceeds Per Share (94.50/100 of $13.24)** $12.51
CLASS C SHARES:
Net Asset Value Per Share ($1,780,543 / 134,170 shares outstanding) $13.27
Offering Price Per Share $13.27
Redemption Proceeds Per Share (99.00/100 of $13.27)** $13.14
</TABLE>
* See "Investing in the Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $16,311) $ 289,341
Interest 51,997
Total income 341,338
EXPENSES:
Investment advisory fee $ 240,269
Administrative personnel and services fee 185,000
Custodian fees 48,533
Transfer and dividend disbursing agent fees and expenses 77,284
Directors'/Trustees' fees 751
Auditing fees 17,794
Legal fees 4,894
Portfolio accounting fees 82,583
Distribution services fee--Class B Shares 44,413
Distribution services fee--Class C Shares 10,379
Shareholder services fee--Class A Shares 29,790
Shareholder services fee--Class B Shares 14,804
Shareholder services fee--Class C Shares 3,460
Share registration costs 40,563
Printing and postage 24,052
Insurance premiums 3,310
Taxes 653
Miscellaneous 10,379
Total expenses 838,911
Waivers and reimbursements--
Waiver of investment advisory fee $(240,269)
Reimbursement of other operating expenses (124,922)
Total waivers and reimbursements (365,191)
Net expenses 473,720
Net operating loss (132,382)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized loss on investments and foreign currency (1,474,894)
transactions
Net change in unrealized appreciation of investments and
translation of assets and
liabilities in foreign currency 165,752
Net realized and unrealized loss on investments and (1,309,142)
foreign currency transactions
Change in net assets resulting from operations $ (1,441,524)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income/(operating loss) $ (132,382) $ 51,143
Net realized gain (loss) on investments and foreign currency transactions
($(1,309,472) net loss and $212,053 net gain respectively, as computed for
federal tax purposes) (1,474,894) 202,797
Net change in unrealized appreciation of investments and
translation of assets and
liabilities in foreign currency 165,752 509,867
Change in net assets resulting from operations (1,441,524) 763,807
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (30,514) --
Class B Shares (5,869) --
Class C Shares (443) --
Distributions from net realized gains
Class A Shares (154,460) --
Class B Shares (50,158) --
Class C Shares (7,444) --
Change in net assets resulting from distributions to (248,888) --
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 41,385,804 13,501,459
Net asset value of shares issued to shareholders in payment of
distributions
declared 159,519 --
Cost of shares redeemed (20,864,198) (7,814,158)
Change in net assets resulting from share transactions 20,681,125 5,687,301
Change in net assets 18,990,713 6,451,108
NET ASSETS:
Beginning of period 6,451,108 --
End of period (including undistributed net investment income of
$0 and $41,887,
respectively) $ 25,441,821 $ 6,451,108
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.56 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.06) 0.12
Net realized and unrealized gain on investments and
foreign currency transactions 2.38(e) 1.44
Total from investment operations 2.32 1.56
LESS DISTRIBUTIONS
Distributions from net investment income (0.08) --
Distributions from net realized gain on investments and foreign
currency transactions (0.41) --
Total distributions (0.49) --
NET ASSET VALUE, END OF PERIOD $13.39 $11.56
TOTAL RETURN(B) 20.76% 15.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.17% 1.97%*
Net investment income (loss) (0.32%) 1.49%*
Expense waiver/reimbursement(c) 1.91% 6.96%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $14,847 $4,836
Average commission rate paid(d) $0.0001 $0.0001
Portfolio turnover 79% 38%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income (loss) ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) The amount shown in this caption for a share outstanding does not correspond
with the aggregate net realized and unrealized gain (loss) on investments
and foreign currency for the period ended due to the timing of sales and
repurchases of Fund shares in relation to fluctuating market values of the
investments of the Fund.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.50 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.04) (0.05)
Net realized and unrealized gain on investments and
foreign currency transactions 2.24(e) 1.55
Total from investment operations 2.20 1.50
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) --
Distributions from net realized gain on investments and foreign
currency transactions (0.41) --
Total distributions (0.46) --
NET ASSET VALUE, END OF PERIOD $13.24 $11.50
TOTAL RETURN(B) 19.72% 15.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.93% 2.72%*
Net operating loss (1.29%) (1.20%)*
Expense waiver/reimbursement(c) 1.90% 6.96%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $8,814 $1,355
Average commission rate paid(d) $0.0001 $0.0001
Portfolio turnover 79% 38%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) The amount shown in this caption for a share outstanding does not correspond
with the aggregate net realized and unrealized gain (loss) on investments
and foreign currency for the period ended due to the timing of sales and
repurchases of Fund shares in relation to fluctuating market values of the
investments of the Fund.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.48 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.04) (0.08)
Net realized and unrealized gain on investments and
foreign currency transactions 2.27(e) 1.56
Total from investment operations 2.23 1.48
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) --
Distributions from net realized gain on investments and foreign
currency transactions (0.41) --
Total distributions (0.44) --
NET ASSET VALUE, END OF PERIOD $13.27 $11.48
TOTAL RETURN(B) 19.97% 14.80%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.93% 2.72%*
Net operating loss (1.23%) (1.30%)*
Expense waiver/reimbursement(c) 1.90% 6.96%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,781 $260
Average commission rate paid(d) $0.0001 $0.0001
Portfolio turnover 79% 38%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) The amount shown in this caption for a share outstanding does not correspond
with the aggregate net realized and unrealized gain (loss) on investments
and foreign currency for the period ended due to the timing of sales and
repurchases of Fund shares in relation to fluctuating market values of the
investments of the Fund.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. ORGANIZATION
World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of eight portfolios. The
financial statements included herein are only those of Federated Latin American
Growth Fund (the "Fund"), a diversified portfolio. The financial statements of
the other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The Fund offers three classes of shares: Class A Shares, Class
B Shares, and Class C Shares. The investment objective of the Fund is to provide
long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- Foreign equity securities are valued at the last sales
price reported on a national securities exchange or the over-the-counter market.
In the absence of recorded sales for equity securities, they are recorded
according to the mean between the last closing bid and asked prices.
Fixed-income securities are valued at the latest bid prices as furnished by an
independent pricing service. Short-term foreign and domestic securities are
valued at the prices provided by an independent pricing service. However,
short-term foreign and domestic securities with remaining maturities of sixty
days or less at the time of purchase may be valued at amortized cost, which
approximates fair market value.
REPURCHASE AGREEMENTS -- It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS -- Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions and net operating losses. The following reclassifications have been
made to the financial statements.
INCREASE (DECREASE)
UNDISTRIBUTED NET INVESTMENT
PAID IN ACCUMULATED NET INCOME/ACCUMULATED DISTRIBUTIONS IN
CAPITAL REALIZED GAIN/LOSS EXCESS OF NET INVESTMENT INCOME
$(190,045) $62,724 $127,321
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
At November 30, 1997, the Fund, for federal tax purposes, had a capital loss
carryforward of $1,309,472, which will reduce the Fund's taxable income arising
from future net realized gains on investments, if any, to the extent permitted
by the code, and thus will reduce the amount of the distributions to
shareholders which would be otherwise necessary to relieve the fund of any
liability for federal tax. Pursuant to the code, such capital loss carryforward
will expire in 2005.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS -- The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency exchange
transactions. Purchased contracts are used to acquire exposure to foreign
currencies; whereas, contracts to sell are used to hedge the Fund's securities
against currency fluctuations. Risks may arise upon entering these transactions
from the potential inability of counter-parts to meet the terms of their
commitments and from unanticipated movements in security prices or foreign
exchange rates. The foreign currency transactions are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the settlement date.
At November 30, 1997, the Fund had outstanding foreign currency commitments as
set forth below:
IN UNREALIZED
CONTRACTS SETTLEMENT CONTRACTS TO EXCHANGE CONTRACTS APPRECIATION
SOLD DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
Mexican Peso 12/01/1997 803,273 $97,662 $97,799 $(137)
FOREIGN CURRENCY TRANSLATION -- The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies ("FC") are translated into U.S. dollars based on the rate of exchange
of such currencies against U.S. dollars on the date of valuation. Purchases and
sales of securities and, income and expenses are translated at the rate of
exchange quoted on the respective date that such transactions are recorded.
Differences between income and expense amounts recorded and collected or paid
are adjusted when reported by the custodian bank. The Fund does not isolate that
portion of the results of operations resulting from changes in foreign exchange
rates on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
RESTRICTED SECURITIES -- Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions exempt
from such registration. In some cases, the issuer of restricted securities has
agreed to register such securities for resale, at the issuer's expense either
upon demand by the Fund or in connection with another registered offering of the
securities. Many restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may be
determined to be liquid under criteria established by the Board of Directors.
The Fund will not incur any registration costs upon such resales. The Fund's
restricted securities are valued at the price provided by dealers in the
secondary market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Chilectra S.A., ADR 2/28/1996 - 7/10/1997 $472,929
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ from
those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1997, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 405,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,717,360 $25,725,399 1,109,989 $11,836,843
Shares issued to shareholders in
payment
of distributions declared 9,396 107,956 -- --
Shares redeemed (1,036,366) (15,394,130) (691,798) (7,761,894)
Net change resulting from Class A
Share
transactions 690,390 $10,439,225 418,191 $ 4,074,949
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 793,687 $11,941,024 117,901 $ 1,357,302
Shares issued to shareholders in payment of
distributions declared 3,855 44,100 -- --
Shares redeemed (249,692) (3,519,328) (10) (119)
Net change resulting from Classs B Share
transactions 547,850 $ 8,465,796 117,891 $ 1,357,183
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 246,035 $ 3,719,381 27,051 $ 307,314
Shares issued to shareholders in payment
of
distributions declared 652 7,463 -- --
Shares redeemed (135,140) (1,950,740) (4,428) (52,145)
Net change resulting from Classs C Share
transactions 111,547 $ 1,776,104 22,623 $ 255,169
Net change resulting from share
transactions 1,349,787 $20,681,125 558,705 $5,687,301
</TABLE>
(a) For the period from February 28, 1996 (date of initial public investment) to
November 30, 1996.
(b) For the period from February 28, 1996 (date of initial public offering) to
November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.25% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and / or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and / or reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Class A Shares, Class B Shares, and Class C
Shares. The Plan provides that the Fund may incur distribution expenses
according to the following schedule annually, to compensate FSC. The Fund does
not currently make payments to the distributor or charge a fee under the
Distribution Plan for Class A Shares.
PERCENTAGE OF AVERAGE DAILY
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund shares for the period. The fee paid to
FSS is used to finance certain services for shareholders and to maintain
shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES -- Organizational and start-up administrative service
expenses of $53,789 were borne initially by the Adviser. The Fund has reimbursed
the Adviser for these expenses. These expenses have been deferred and are being
amortized over the five-year period following the Fund's effective date. For the
year ended November 30, 1997, the Fund expensed $6,873 of organizational and
start-up administrative service expenses.
GENERAL -- Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $33,497,740
SALES $14,055,479
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of countries was as follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Argentina 10.92%
Brazil 34.11
Chile 6.70
Colombia 2.18
Mexico 36.58
Peru 0.65
Venezuela 3.66
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated Latin American Growth Fund (a
portfolio of World Investment Series, Inc.) as of November 30, 1997, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Latin American Growth Fund of World Investment Series, Inc. at
November 30, 1997, and the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 20, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
[Graphic]
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 981487796
Cusip 981487788
Cusip 981487770
G01940-01 (1/98)
[Graphic]
[Graphic]Federated Investors
Federated International High Income Fund
2ND ANNUAL REPORT
NOVEMBER 30, 1997
ESTABLISHED 1996
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
Federated International High Income Fund was created in 1996, and I am pleased
to present its second Annual Report. This report contains complete information
about the fund's operation over the fiscal year reporting period from December
1, 1996 through November 30, 1997.
The report begins with a discussion with Robert Kowit, Vice President, who
co-manages the fund with Mike Casey, Assistant Vice President, both of Federated
Global Research Corp. Their discussion covers international economic and market
conditions and fund strategy. Following their commentary is a listing of the
fund's international bond investments and the financial statements.
The fund offers shareholders income opportunities from a select portfolio of
carefully researched international bonds issued by companies and governments
outside the U.S.* At the end of the reporting period, the fund's more than $65
million in assets were invested in 51 government bonds and 48 international
corporate issues across 33 countries. Thanks to a strong income stream, the
fund's total returns were positive for the reporting period, despite a volatile
price environment in the wake of the Asian Pacific region's economic problems
and a strong U.S. dollar. Share class performance highlights are as follows.**
TOTAL NET ASSET VALUE
RETURN INCOME MOVEMENT
Class A Shares 4.02% $1.02 $10.12 to $9.50 = (6%)
Class B Shares 3.24% $0.95 $10.12 to $9.50 = (6%)
Class C Shares 3.24% $0.95 $10.12 to $9.50 = (6%)
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
**Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the 12-month reporting period based on
offering price for Class A, B, and C Shares were (0.69%), (2.36%), and 2.27%,
respectively.
If you are not already doing so, I invite you to join the many shareholders who
reinvest their monthly dividends and add to their accounts on a regular basis to
compound their shares and own more shares for future income.+
Thank you for your investment in Federated International High Income Fund and
for the confidence you have shown by investing a portion of your wealth in the
fund.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1998
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
INVESTMENT REVIEW
[Graphic]
Robert Kowit
Vice President
Federated Global Research Corp.
[Graphic]
Mike Casey
Assistant Vice President
Federated Global Research Corp.
[Graphic]
TO WHAT EXTENT DID THE ASIAN CURRENCY CRISIS IMPACT THE DEVELOPED AND
EMERGING BOND MARKETS, AND WHAT IMPACT DID THE STRONG U.S. DOLLAR HAVE ON
RETURNS?
Emerging bond markets were very volatile late in the fund's fiscal year. The
Asian currency crisis caused a major sell-off in the emerging bond markets and
the J.P. Morgan Emerging Markets Bond Index Plus* returned (8.11%) for the
six-week period ended November 30, 1997. Developed markets did slightly better
showing a return of (0.46%) for the same time period, according to the J.P.
Morgan Non-U.S. Dollar Bond Index.** The continued strength of the U.S. dollar
overshadowed the excellent performance of the developed markets in local terms.
For the 12-month fiscal year reporting period ended November 30, 1997, the
emerging markets' return was still a positive 10.51%, while the developed market
return was (3.5%).
[Graphic]
HOW DID FEDERATED INTERNATIONAL HIGH INCOME FUND PERFORM FOR SHAREHOLDERS OVER
THE 12-MONTH REPORTING PERIOD ENDED NOVEMBER 30, 1997?
The fund's total returns, based on net asset value, were: Class A Shares, 4.02%;
Class B Shares, 3.24%; and Class C Shares, 3.24%.+ These returns outpaced the
negative return of the developed markets and the slightly positive return of the
emerging markets.
[Graphic]
INCOME IS A PRIMARY CONSIDERATION FOR SHAREHOLDERS. WHAT LEVEL OF INCOME DID
THE FUND PROVIDE DURING THE REPORTING PERIOD?
While the fund's total return was impacted by a slight decrease in net asset
value, the fund paid a healthy monthly income stream totaling $1.02 per share
for Class A Shares, $0.95 for Class B Shares, and $0.95 per share for Class C
Shares.
* The J.P. Morgan Emerging Market Bonds Index Plus is an unmanaged index that
tracks the total returns of external currency denominated debt instruments of
14 emerging markets countries. Investments cannot be made in an index.
** The J.P. Morgan Non U.S.-Dollar Bond Index is a total return, unmanaged
trade-weighted index of over 360 government and high-grade bonds in 12
developed countries. Investments cannot be made in an index.
+ Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the 12-month reporting period based on
offering price for Class A, B, and C Shares were (0.69%), (2.36%), and 2.27%,
respectively.
[Graphic]
DID THE CURRENCY CRISIS IN THE ASIAN REGION--NOTABLY THAILAND, INDONESIA,
MALAYSIA AND THE PHILIPPINES--HAVE A SIGNIFICANT IMPACT ON THE FUND?
The Asian currency crisis had an indirect and direct impact on the fund. The
indirect impact was the sell-off of all emerging market assets caused by the
currency crisis. The direct impact was on the Asian assets held by the fund. The
fund held approximately 7% of its assets in Indonesia, 3% in China, and less
than 1% in Korea. Many of these holdings were marked down 10-15 points.
[Graphic]
THE FUND MAINTAINS A GENERAL ALLOCATION OF 20%-30% TO DEVELOPED MARKETS AND
70%-80% TO EMERGING MARKETS. WHAT WERE THE TOP INTERNATIONAL GOVERNMENT AND
INTERNATIONAL CORPORATE HOLDINGS AS OF NOVEMBER 30, 1997?
The fund's top international government holdings were:
TOP HOLDINGS PERCENTAGE
COUNTRY OF PORTFOLIO
Mexico (emerging) 7.90%
Ecuador (emerging) 3.82
Poland (emerging) 3.21
Russia (emerging) 3.15
Argentina (emerging) 3.24
The fund's top international corporate holdings were:
TOP HOLDINGS PERCENTAGE
NAME COUNTRY OF PORTFOLIO
Espirito Santo Brazil (emerging) 1.38%
Durango Mexico (emerging) 1.37
Bridas Argentina (emerging) 1.33
Vicap Mexico (emerging) 1.27
Mechala Note Jamaica (emerging) 1.15
[Graphic]
WHAT IS YOUR OUTLOOK FOR 1998?
We expect the international markets to remain volatile through the first half of
1998 as the Asian currency crisis and its aftershocks continue to dominate
events. Once the Asian turmoil subsides, there should be flows of new money into
emerging market assets, which should show reasonable performance through the
second half of the year.
WHERE IN THE WORLD SHOULD YOU INVEST?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND
[Graphic]
FEDERATED EMERGING MARKETS FUND
[Graphic]
FEDERATED EUROPEAN GROWTH FUND
[Graphic]
FEDERATED INTERNATIONAL EQUITY FUND
[Graphic]
FEDERATED INTERNATIONAL GROWTH FUND
[Graphic]
FEDERATED INTERNATIONAL HIGH INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL SMALL COMPANY FUND
[Graphic]
FEDERATED LATIN AMERICAN GROWTH FUND
[Graphic]
FEDERATED WORLD UTILITY FUND
Employ highly qualified, experienced managers in global investing to select
countries and companies outside the U.S. for long-term growth potential.
Call your investment representative to buy shares of 8 international equity
funds and 2 international income funds from Federated Investors.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL 1-800-341-7400 TO
ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU INVEST.
Foreign investing involves special risks including currency risks, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
Federated Inter-national High Income Fund (Class A Shares) (the "Fund") from
October 2, 1996 (start of performance) to November 30, 1997 compared to the
J. P. Morgan Emerging Markets Bond Index Plus (JPEMCOMP).+
[Graphic representation omitted See Appendix #22.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge
= $9,550). The Fund's performance assumes the reinvestment of all dividends
and distributions. The JPEMCOMP has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+The JPEMCOMP is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.
FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
Federated International High Income Fund (Class B Shares) (the "Fund") from
October 2, 1996 (start of performance) to November 30, 1997 compared to the
J. P. Morgan Emerging Markets Bond Index Plus (JPEMCOMP).+
[Graphic representation omitted See Appendix #23.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
*Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 4.75% on any
redemption less than two years from the purchase date. The maximum contingent
deferred sales charge is 5.50% on any redemption less than one year from the
purchase date. The Fund's performance assumes the reinvestment of all dividends
and distributions. The JPEMCOMP has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+The JPEMCOMP is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.
FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
Federated International High Income Fund (Class C Shares) (the "Fund") from
October 2, 1996 (start of performance) to November 30, 1997 compared to the
J. P. Morgan Emerging Markets Bond Index Plus (JPEMCOMP).+
[Graphic representation omitted See Appendix #24.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 1.00% on any
redemption less than one year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The JPEMCOMP has
been adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPEMCOMP is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.
FEDERATED INTERNATIONAL HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
COMMERCIAL PAPER--0.9%
PAPER PRODUCTS--0.4%
1,000,000,000 APP International, 18.00%, 3/11/1998 $ 254,101
UTILITIES--0.5%
1,500,000 Eskom CP 1/19/1998 305,959
TOTAL COMMERCIAL PAPER (IDENTIFIED COST $699,558) 560,060
CORPORATE BONDS--50.9%
BANKING--0.9%
550,000 Bancomext Trust, Bank Guarantee, 11.25%, 5/30/2006 590,425
BEVERAGE & TOBACCO--2.5%
1,150,000 Empresas La Moderna, 11.375%, 1/25/1999 1,167,250
500,000 Sampoerna International, 8.375%, 6/15/2006 450,730
Total 1,617,980
BUILDING & DEVELOPMENT--0.9%
500,000 Cemex SA, Bond, 12.75%, 7/15/2006 587,500
CABLE TELEVISION--0.8%
650,000 Rogers Communications, Inc., 10.50%, 2/14/2006 510,909
CONGLOMERATES--2.3%
1,000,000,000 Dharmala Intiutama, 16.00%, 1/20/1998 137,080
1,000,000,000 Dharmala Intiutama, 18.50%, 2/24/1998 68,540
350,000 Mechala Group Jamaica, Series REGS, 12.00%, 2/15/2002 325,500
1,000,000 Mechala Group Jamaica, Note, 12.75%, 12/30/1999 970,000
Total 1,501,120
CONSTRUCTION--0.9%
600,000 Corporacion GEO, S.A. de C.V., Note, 10.00%, 5/23/2002 612,000
CONTAINER & GLASS PRODUCTS--1.2%
750,000 Vicap SA, Sr. Note, 11.375%, 5/15/2007 811,875
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
CORPORATE BONDS--CONTINUED
FINANCE--0.7%
500,000 Unexim Int'l. Finance, 9.875%, 1/1/2000 $ 437,500
FINANCIAL INTERMEDIARIES--2.2%
1,260,000 Brierley Investments Ltd., Bond, 9.00%, 3/15/2002 798,431
4,294,000 Nykredit, Mtg. Bond, 8.00%, 10/1/2029 662,102
Total 1,460,533
FOREST PRODUCTS--7.1%
500,000 Asia Pulp & Paper Co. Ltd., Company Guarantee, 11.75%,
10/1/2005 505,000
800,000 Indah Kiat Int'l. Finance, Company Guarantee, 11.875%, 6/15/2002 822,000
950,000 Indah Kiat Int'l. Finance, Company Guarantee, 12.50%, 6/15/2006 997,500
1,550,000 Klabin Fabricadora Papel, Company Guarantee, Series REGS,
11.00%, 8/12/2004 1,524,812
700,000 TJiwi Kim Global, Company Guarantee, 13.25%, 8/1/2001 763,868
Total 4,613,180
INDUSTRIAL PRODUCTS & EQUIPMENT--0.7%
450,000 Sophora Comercio, 11.50%, 11/10/1998 459,000
OIL & GAS--4.1%
750,000 Bariven SA, Company Guarantee, 10.625%, 3/17/2002 801,750
482,634 Centragas, 10.65%, 12/1/2010 512,060
450,000 Invergas SA, Note, 12.50%, 12/16/1999 475,875
450,000 MetroGas S.A., Sr. Note, 12.00%, 8/15/2000 483,750
400,000 Petroleo Brasileiro SA, 10.40%, 6/8/1998 402,000
Total 2,675,435
PACKAGING--1.4%
800,000 Grupo Industrial Durango SA de CV, 12.625%, 8/1/2003 886,000
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
CORPORATE BONDS--CONTINUED
STEEL--2.8%
500,000 (a)Altos Hornos De Mexico, Bond, 11.875%, 4/30/2004 $ 528,750
300,000 Metalurgica Gerdau, Company Guarantee, 10.25%, 11/23/2001 306,900
200,000 Metalurgica Gerdau, Company Guarantee, 11.125%, 5/24/2004 195,920
700,000 Tubos de Acero de Mexico SA, Unsub., 13.75%, 12/8/1999 784,000
Total 1,815,570
SURFACE TRANSPORTATION--3.5%
500,000 GS Superhighway, Sr. Note, 10.25%, 8/15/2007 460,000
450,000,000 Societe Nationale Des Chemins, Sr. Unsub., 9.20%, 6/22/2006 282,494
500,000 Road King Infrastructure, Series 144a, 9.50%, 7/15/2007 447,500
2,600,000 Trans Caledon Tunnel Authority, 13.00%, 9/15/2010 487,249
1,500,000 Transnet Ltd., Foreign Gov't. Guarantee, Series T016, 11.50%,
2/15/1999 298,067
250,000 (a)Zhuhai Highway, Sub. Note, 11.50%, 7/1/2008 270,000
Total 2,245,310
TELECOMMUNICATIONS & CELLULAR--10.8%
500,000 CANTV Finance Ltd., Company Guarantee, 9.25%, 2/1/2004 496,250
2,100,000 Clearnet Communications, Sr. Disc. Note, 8/13/2007 894,935
200,000 (a)Comtel Brasileir, Note, 10.75%, 9/26/2004 188,250
300,000 Comtel Brasileir, Note, Series REGS, 10.75%, 9/26/2004 285,000
1,185,000 Grupo Televisa S.A., Sr. Disc. Note, 0/13.25%, 5/15/2008 899,119
3,200,000 Microcell Telecommunications, Sr. Disc. Note, 0/11.125%,
10/15/2007 1,145,786
500,000 Philippine Long Distance Telephone Co., Deb., 10.625%, 6/2/2004 517,500
1,850,000 Telefonica de Argentina S.A., Note, 11.875%, 11/1/2004 2,081,250
500,000 Tricom, S.A., Sr. Note, 11.375%, 9/1/2004 487,500
Total 6,995,590
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
CORPORATE BONDS--CONTINUED
TEXTILES--1.6%
1,000,000,000 Polysindo International Finance Co. BV, 3/27/1998 $ 247,293
800,000 Polysindo International Finance Co. BV, Company Guarantee,
11.375%, 6/15/2006 810,000
Total 1,057,293
UTILITIES--6.5%
650,000 AES China Generating Co., Note, 10.125%, 12/15/2006 656,500
800,000 Bridas Corp., Sr. Note, 12.50%, 11/15/1999 847,000
600,000 Comp Paranaense De Energ, 9.75%, 5/2/2005 558,000
1,000,000 CIA Saneamento Basico, Bond, 10.00%, 7/28/2005 922,500
1,000,000 Espirito Santo Financial Holding SA, 10.00%, 7/15/2007 882,500
500,000 National Power Co. PLC, 8.00%, 2/21/2007 362,580
Total 4,229,080
TOTAL CORPORATE BONDS (IDENTIFIED COST $35,060,309) 33,106,300
GOVERNMENT AGENCIES--42.4%
1,500,000 Argentina Global, Bond, 11.375%, 1/30/2017 1,588,500
1,000,000 Bundesrepublic Deutschland, 6.00%, 7/4/2007 588,375
350,000,000 European Bank for Reconstruction and Development, Bond,
10.00%, 5/2/2002 256,626
100,000,000 Government of Hungary, 16.50%, 7/24/1999 488,777
35,850,000 Government of Kenya, 25.25% accrual, 12/1/1997 563,377
130,000,000 Hellenic Republic, Bond, 11.00%, 10/23/2003 446,882
50,000,000 Hellenic Republic, Bond, 11/26/2003 171,733
75,000,000 Hellenic Republic, Bond, 12.60%, 12/31/2003 254,835
100,000,000 Hellenic Republic, Bond, 13.50%, 12/27/2002 353,696
150,000,000 Hellenic Republic, Bond, 9.80%, 3/21/2000 487,981
100,000,000 Hungary, Bond, 16.50%, 4/12/1999 488,527
45,000,000 Hungary, Bond, 24.00%, 3/21/1998 227,917
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
GOVERNMENT AGENCIES--CONTINUED
7,500,000 International Finance Corp., Note, 11.75%, 8/15/1999 $ 179,958
1,000,000 Islamic Republic of Pakistan, Deb., 11.50%, 12/22/1999 1,048,990
1,300,000,000 Italy (Republic of), Deb., 10.50%, 4/1/2005 961,176
1,050,000 Kingdom of Denmark, Bond, 7.00%, 11/10/2024 167,455
10,000,000 Mexican Cetes, 10/22/1998 1,018,445
10,380,000 Mexican Cetes, 9/24/1998 1,071,680
1,250,000 Ministry Finance Russia, 10.00%, 6/26/2007 1,109,375
450,000 Ministry Finance Russia, Unsub., 9.25%, 11/27/2001 430,875
750,000 National Bank of Romania, 9.75%, 6/25/1999 757,969
500,000 New South Wales Treasury, Local Gov't. Guarantee, 12.60%,
5/1/2006 476,237
500,000 Oblast Nizhniy Novgorod, 8.75%, 10/3/2002 423,750
500,000 Philippines, 8.75%, 10/7/2016 442,350
2,500,000 Poland Gov't. Bond, 12.00%, 2/12/2003 504,594
1,000,000 Poland Gov't. Bond, 12.00%, 6/12/2002 204,976
4,250,000 Poland Gov't. Bond, 15.00%, 10/12/1999 1,045,377
500,000 Poland Gov't. Bond, 15.00%, 6/12/1999 127,933
600,000 Poland (Republic of) Bond, 16.00%, 10/12/1998 158,100
500,000 Republic of Argentina, Note, 11.75%, 2/12/2007 465,170
2,350,000 Republic of Ecuador, 11.25%, 4/25/2002 2,420,500
2,050,000 Romania, Bond, 7.75%, 6/17/2002 1,121,775
500,000 Russia, 10.00%, 6/26/2007 452,555
2,000,000 South Africa (Republic of) Bond, 12.00%, 2/28/2005 370,506
1,000,000 South Africa (Republic of) Bond, 12.50%, 12/21/2006 186,168
2,000,000 South Africa (Republic of) Bond, 12.50%, 1/15/2002 389,181
3,600,000 Swedish Government, Bond, 8.00%, 8/15/2007 525,111
500,000 Trinidad and Tobago, Unsub., 11.75%, 10/3/2004 608,750
400,000 Turkey, 10.00%, 5/23/2002 419,400
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR AND SHARE VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
GOVERNMENT AGENCIES--CONTINUED
700,000 Turkey, 10.00%, 9/19/2007 $ 686,861
600,000 Turkey, Deb., 11.50%, 4/27/1999 629,700
300,000 United Kingdom Treasury, Foreign Gov't. Guarantee, 11.75%,
1/22/2007 613,071
500,000 United Mexican States, Bond, 9.875%, 1/15/2007 517,005
350,000,000 Venezuela, 20.78%, 1/8/1998 700,109
1,000,000 Venezuela, Sr. Unsub., 9.125%, 6/18/2007 945,000
17,000,000 World Bank, Unsub., 13.75%, 9/18/1998 477,814
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $28,596,048) 27,575,142
WARRANTS--0.0%
SOVEREIGN--0.0%
2,500 Venezuela Rep Oil Linked, Warrants (IDENTIFIED COST $0) 0
(B)REPURCHASE AGREEMENT--3.3%
$ 2,125,000 BT Securities Corporation, 5.73%, dated 11/28/1997,
due 12/1/1997 (AT AMORTIZED COST) 2,125,000
TOTAL INVESTMENTS (IDENTIFIED COST $66,480,915)(C) $ 63,366,502
</TABLE>
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $987,000 which represents 1.5% of net assets.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $66,480,915. The
net unrealized depreciation of investments on a federal tax basis amounts to
$3,113,758 which is comprised of $386,559 appreciation and $3,500,317
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($65,038,804) at November 30, 1997.
The following acronyms are used throughout this portfolio:
CP --Commercial Paper
PLC --Public Limited Company
SA --Support Agreement
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $66,480,915) $ 63,366,502
Cash 21,456
Cash denominated in foreign currencies (at identified cost $136,426) 137,081
Income receivable 1,848,886
Receivable for shares sold 1,585,307
Deferred organizational costs 42,500
Total assets 67,001,732
LIABILITIES:
Payable for investments purchased $1,542,542
Payable for shares redeemed 6,008
Income distribution payable 331,676
Payable for taxes withheld 4,299
Accrued expenses 78,403
Total liabilities 1,962,928
NET ASSETS for 6,847,097 shares outstanding $ 65,038,804
NET ASSETS CONSIST OF:
Paid in capital $ 68,162,037
Net unrealized depreciation of investments and translation of assets and liabilities (3,121,426)
in foreign currency
Accumulated net realized gain on investments and foreign currency transactions 401,272
Distributions in excess of net investment income (403,079)
Total Net Assets $ 65,038,804
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($9,073,470 / 955,093 shares outstanding) $9.50
Offering Price Per Share (100/95.50 of $9.50)* $9.95
Redemption Proceeds Per Share $9.50
CLASS B SHARES:
Net Asset Value Per Share ($49,928,826 / 5,256,527 shares outstanding) $9.50
Offering Price Per Share $9.50
Redemption Proceeds Per Share (94.50/100 of $9.50)** $8.98
CLASS C SHARES:
Net Asset Value Per Share ($6,036,508 / 635,477 shares outstanding) $9.50
Offering Price Per Share $9.50
Redemption Proceeds Per Share (99.00/100 of $9.50)** $9.41
</TABLE>
* See "Investing in the Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign taxes withheld of $11,970) $ 3,612,529
EXPENSES:
Investment advisory fee $ 272,638
Administrative personnel and services fee 185,000
Custodian fees 61,201
Transfer and dividend disbursing agent fees and expenses 101,183
Directors'/Trustees' fees 939
Auditing fees 17,794
Legal fees 1,611
Portfolio accounting fees 87,264
Distribution services fee--Class B Shares 195,482
Distribution services fee--Class C Shares 17,618
Shareholder services fee--Class A Shares 9,154
Shareholder services fee--Class B Shares 65,161
Shareholder services fee--Class C Shares 5,873
Share registration costs 50,124
Printing and postage 26,063
Insurance premiums 3,400
Taxes 89
Miscellaneous 4,576
Total expenses 1,105,170
Waivers and reimbursements--
Waiver of investment advisory fee $ (272,638)
Reimbursement of other operating expenses (377,447)
Total waivers and reimbursements (650,085)
Net expenses 455,085
Net investment income 3,157,444
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments and foreign currency (127,533)
transactions
Net change in unrealized depreciation of investments and
translation of
assets and liabilities in foreign currency (3,203,065)
Net realized and unrealized gain on investments and (3,330,598)
foreign currency transactions
Change in net assets resulting from operations $ (173,154)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 3,157,444 $ 85,010
Net realized gain (loss) on investments and foreign currency
transactions ($401,272 net gain and $0, respectively, as computed
for federal tax purposes) (127,533) 227
Net change in unrealized appreciation (depreciation) of investments
and translation of assets and liabilities in foreign currency (3,203,065) 81,639
Change in net assets resulting from operations (173,154) 166,876
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (371,540) (69,102)
Class B Shares (2,435,667) (15,313)
Class C Shares (217,775) (595)
Distributions in excess of net investment income
Class A Shares -- (6,963)
Change in net assets resulting from distributions to shareholders (3,024,982) (91,973)
SHARE TRANSACTIONS--
Proceeds from sale of shares 65,492,534 13,882,835
Net asset value of shares issued to shareholders in payment of
distributions declared 1,066,512 8,455
Cost of shares redeemed (4,400,916) (7,887,383)
Change in net assets resulting from share transactions 62,158,130 6,003,907
Change in net assets 58,959,994 6,078,810
NET ASSETS:
Beginning of period 6,078,810 --
End of period $ 65,038,804 $ 6,078,810
</TABLE>
(a) For the period from October 2, 1996 (date of initial public investment) to
November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.18 0.17(e)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.78) 0.13
Total from investment operations 0.40 0.30
LESS DISTRIBUTIONS
Distributions from net investment income (1.02) (0.17)
Distributions in excess of net investment income -- (0.01)(b)
Total distributions from net investment income (1.02) (0.18)
NET ASSET VALUE, END OF PERIOD $ 9.50 $10.12
TOTAL RETURN(C) 4.02% 2.99%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.75% 0.75%*
Net investment income 10.54% 9.19%*
Expense waiver/reimbursement(d) 2.03% 8.46%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $9,073 $599
Portfolio turnover 93% 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 2, 1996 (date of initial
public offering) to November 30, 1996.
(b) Distributions in excess of net investment income were a result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e)Per share information is based on the bi-monthly average number of shares
outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.96 0.18(b)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.63) 0.11
Total from investment operations 0.33 0.29
LESS DISTRIBUTIONS
Distributions from net investment income (0.95) (0.17)
NET ASSET VALUE, END OF PERIOD $ 9.50 $10.12
TOTAL RETURN(C) 3.24% 2.87%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.50% 1.50%*
Net investment income 9.73% 8.92%*
Expense waiver/reimbursement(d) 2.03% 8.46%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $49,929 $5,397
Portfolio turnover 93% 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 2, 1996 (date of initial
public offering) to November 30, 1996.
(b) Per share information presented is based upon the bi-monthly average number
of shares outstanding.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.98 0.17(b)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.65) 0.12
Total from investment operations 0.33 0.29
LESS DISTRIBUTIONS
Distributions from net investment income (0.95) (0.17)
NET ASSET VALUE, END OF PERIOD $ 9.50 $10.12
TOTAL RETURN(C) 3.24% 2.87%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.50% 1.50%*
Net investment income 10.04% 8.67%*
Expense waiver/reimbursement(d) 2.03% 8.46%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $6,037 $83
Portfolio turnover 93% 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 2, 1996 (date of initial
public investment) to November 30, 1996.
(b) Per share information presented is based upon the bi-monthly average number
of shares outstanding.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
1. ORGANIZATION
World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of eight portfolios. The
financial statements included herein are only those of Federated International
High Income Fund (the "Fund"), a diversified portfolio. The financial statements
of the other portfolios are presented separately. The assets of each portfolio
are segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The investment objective of the Fund is to seek a high level of
current income.
The Fund offers three classes of shares: Class A Shares, Class B Shares and
Class C Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS --U.S. government securities, listed corporate bonds,
(other fixed income and asset-backed securities), and unlisted securities and
private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing
service. However, short-term securities with remaining maturities of sixty
days or less at the time of purchase may be valued at amortized cost, which
approximates fair market value. With respect to valuation of foreign
securities, trading in foreign cities may be completed at times which vary
from the closing of the New York Stock Exchange. Therefore, foreign securities
are valued at the latest closing price on the exchange on which they are
traded prior to the closing of the New York Stock Exchange. Foreign securities
quoted in foreign currencies are translated into U.S. dollars at the foreign
exchange rate in effect at noon, eastern time, on the day the value of the
foreign security is determined.
REPURCHASE AGREEMENTS --It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS --Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions. The following reclassifications have been made
to the financial statements.
INCREASE (DECREASE)
ACCUMULATED DISTRIBUTIONS
ACCUMULATED NET IN EXCESS OF
REALIZED GAIN/LOSS NET INVESTMENT INCOME
$528,805 $(528,805)
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES --It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS --The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS --The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the Fund's
securities against currency fluctuations. Risks may arise upon entering these
transactions from the potential inability of counterparts to meet the terms of
their commitments and from unanticipated movements in security prices or
foreign exchange rates. The foreign currency transactions are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purpose as unrealized until the settlement
date. At November 30, 1997, the Fund had no outstanding foreign currency
commitments.
FOREIGN CURRENCY TRANSLATION --The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies ("FC") are translated into U.S. dollars based on the rate of
exchange of such currencies against U.S. dollars on the date of valuation.
Purchases and sales of securities, income and expenses are translated at the
rate of exchange quoted on the respective date that such transactions are
recorded. Differences between income and expense amounts recorded and
collected or paid are adjusted when reported by the custodian bank. The Fund
does not isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates
on securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at fiscal year
end, resulting from changes in the exchange rate.
RESTRICTED SECURITIES --Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the issuer's
expense either upon demand by the Fund or in connection with another
registered offering of the securities. Many restricted securities may be
resold in the secondary market in transactions exempt from registration. Such
restricted securities may be determined to be liquid under criteria
established by the Directors. The Fund will not incur any registration costs
upon such resales. The Fund's restricted securities are valued at the price
provided by dealers in the secondary market or, if no market prices are
available, at the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at November 30, 1997
is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Altos Hornos De Mexico, Bond 04/30/1997 $498,040
Comtel Brasileir, Note 10/02/1996 265,625
Zhuhai Highway, Sub. Note 10/02/1996 205,000
USE OF ESTIMATES --The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ
from those estimated.
OTHER --Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1997, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total shares authorized 405,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 947,873 $ 9,368,221 844,791 $ 8,447,943
Shares issued to shareholders in
payment of distributions declared 16,193 159,561 104 1,048
Shares redeemed (68,227) (673,400) (785,641) (7,887,383)
Net change resulting from Class A
Share transactions 895,839 $ 8,854,382 59,254 $ 561,608
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 4,965,419 $ 49,422,176 532,539 $ 5,353,399
Shares issued to shareholders in
payment of distributions declared 80,852 796,727 696 7,044
Shares redeemed (322,979) (3,166,390) -- --
Net change resulting from Class B
Share transactions 4,723,292 $ 47,052,513 533,235 $ 5,360,443
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1997 NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 673,112 $ 6,702,138 8,154 $ 81,493
Shares issued to shareholders in
payment of distributions declared 11,256 110,223 36 363
Shares redeemed (57,081) (561,126) -- --
Net change resulting from Class C
Share transactions 627,287 $ 6,251,235 8,190 $ 81,856
Net change resulting from share
transactions 6,246,418 $ 62,158,130 600,679 $ 6,003,907
</TABLE>
(a) Reflects operations from October 2, 1996 (date of initial public investment)
to November 30, 1996.
(b) Reflects operations from October 2, 1996 (date of initial public offering)
to November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE --Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 0.85% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE --Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE --The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Class A Shares, Class B Shares, and Class C
Shares. The Plan provides that the Fund may incur distribution expenses
according to the following schedule annually, to compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
For the year ended November 30, 1997, Class A Shares did not incur a
distribution services fee.
SHAREHOLDER SERVICES FEE --Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund shares for the period. The fee paid to
FSS is used to finance certain services for shareholders and to maintain
shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES --FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on
the size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES --FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES --Organizational and start-up administrative service
expenses of $34,676 were borne initially by the Adviser. The Fund has
reimbursed the Adviser for these expenses. These expenses have been deferred
and are being amortized over the five-year period following the Fund's
effective date. For the year ended November 30, 1997, the Fund expensed $3,851
of organizational and start-up administrative service expenses.
GENERAL --Certain of the Officers and Directors of the Corporation are
Officers and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $87,408,142
SALES $28,496,434
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of countries was as follows:
PERCENTAGE PERCENTAGE
COUNTRY OF NET ASSETS COUNTRY OF NET ASSETS
Argentina 9.14% Kenya 0.87%
Australia 0.73 Korea, Republic of 0.39
Brazil 8.80 Mexico 14.57
Canada 3.92 New Zealand 1.23
China 2.82 Pakistan 1.61
Colombia 0.79 Philippines 1.48
Czech Republic 0.73 Poland 3.14
Denmark 1.28 Romania 2.89
Dominican Republic 0.75 Russia 4.39
Ecuador 3.72 Slovakia 0.28
France 0.43 South Africa 2.66
Germany 0.90 Sweden 0.81
Greece 2.64 Trinidad and Tobago 0.94
Hungary 1.85 Turkey 2.67
Indonesia 7.77 United Kingdom 1.50
Italy 1.48 Venezuela 4.53
Jamaica 1.99
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated International High Income Fund (a
portfolio of World Investment Series, Inc.) as of November 30, 1997, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated International High Income Fund of World Investment Series, Inc. at
November 30, 1997, and the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 20, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]FEDERATED INVESTORS
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 981487762
Cusip 981487754
Cusip 981487747
G01949-01 (1/98)
[Graphic]
1. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 4/24/94
to 11/30/97. The "y" axis is measured in increments of $1,000 ranging from $0 to
$7,000 and indicates that the ending value of hypothetical initial investment of
$4,000, assuming the 5.50% sales charge, in the Federated World Utility Fund's
Class A Shares, assuming the reinvestment of capital gains and dividends, would
have grown to $6,156 on 11/30/97.
2. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 4/22/94
to 11/30/97. The "y" axis is measured in increments of $2,000 ranging from $0 to
$6,000 and indicates that the ending value of hypothetical yearly investments of
$1,000 in Federated World Utility Fund's Class A Shares, assuming the
reinvestment of capital gains and dividends, would have grown to $5,341 on
11/30/97.
3. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated World Utility Fund (Class A Shares) is represented
by a solid line, whereas Standard and Poor's 500 Index (S&P 500) is represented
by a dotted line, FT Actuaries/S&P Global Utility Index (FTGUI) is represented
by a dashed line, and the Lipper Utility Funds Average (LPUFA) is represented by
a broken line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment of $10,000 in the Federated World
Utility Fund (Class A Shares) for the period from February 22, 1994 (start of
performance) to November 30, 1997. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Federated World Utility Fund (Class A Shares)
as compared to the S&P 500, FTGUI, and LPUFA; the ending values are $15,552,
$23,185, $15,185, and $15,979, respectively. Beneath the list of components that
correspond to the line graph are the following average annual total return data
for the Federated World Utility Fund (Class A Shares): total return figures for
the one-year period and start of performance-to-date total returns are as
follows: 12.52% and 12.69%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated World Utility Fund (Class B Shares) is represented
by a solid line, whereas Standard and Poor's 500 Index (S&P 500) is represented
by a dotted line, FT Actuaries/S&P Global Utility Index (FTGUI) is represented
by a dashed line, and the Lipper Utility Funds Average (LPUFA) is represented by
a broken line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment of $10,000 in the Federated World
Utility Fund (Class B Shares) for the period from July 27, 1995 (start of
performance) to November 30, 1997. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Federated World Utility Fund (Class B Shares)
as compared to the S&P 500, FTGUI, and LPUFA; the ending values are $14,287,
$17,880, $14,210, and $14,749, respectively. Beneath the list of components that
correspond to the line graph are the following average annual total return data
for the Federated World Utility Fund (Class B Shares): total return figures for
the one-year period and start of performance-to-date total returns are as
follows: 12.19% and 16.43%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated World Utility Fund (Class C Shares) is represented
by a solid line, whereas Standard and Poor's 500 Index (S&P 500) is represented
by a dotted line, FT Actuaries/S&P Global Utility Index (FTGUI) is represented
by a dashed line, and the Lipper Utility Funds Average (LPUFA) is represented by
a broken line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment of $10,000 in the Federated World
Utility Fund (Class C Shares) for the period from July 27, 1995 (start of
performance) to November 30, 1997. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Federated World Utility Fund (Class C Shares)
as compared to the S&P 500, FTGUI, and LPUFA; the ending values are $14,749,
$17,880, $14,210, and $14,749, respectively. Beneath the list of components that
correspond to the line graph are the following average annual total return data
for the Federated World Utility Fund (Class C Shares): total return figures for
the one-year period and start of performance-to-date total returns are as
follows: 17.15% and 17.91%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated World Utility Fund (Class F Shares) is represented
by a solid line, whereas Standard and Poor's 500 Index (S&P 500) is represented
by a dotted line, FT Actuaries/S&P Global Utility Index (FTGUI) is represented
by a dashed line, and the Lipper Utility Funds Average (LPUFA) is represented by
a broken line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment of $10,000 in the Federated World
Utility Fund (Class F Shares) for the period from February 22, 1994 (start of
performance) to November 30, 1997. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Federated World Utility Fund (Class F Shares)
as compared to the S&P 500, FTGUI, and LPUFA; the ending values are $15,964,
$23,185, $15,185 and $15,979, respectively. Beneath the list of components that
correspond to the line graph are the following average annual total return data
for the Federated World Utility Fund (Class F Shares): total return figures for
the one-year period and start of performance-to-date total returns are as
follows: 16.70% and 13.85%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
7. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated Asia Pacific Growth Fund (Class A Shares) is
represented by a solid line, whereas Morgan Stanley Capital International Asia
Pacific Index is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated Asia Pacific Growth Fund (Class A Shares) for the
period from February 28, 1996 (start of performance) to November 30, 1997. The
"y" axis reflects the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Federated
Asia Pacific Growth Fund (Class A Shares) as compared to Morgan Stanley Capital
International Asia Pacific Index; the ending values are $7,381 and $7,082,
respectively. Beneath the list of components that correspond to the line graph
are the following average annual total return data for the Federated Asia
Pacific Growth Fund (Class A Shares): total return figures for the one-year
period and start of performance-to-date total returns are as follows: (28.02%)
and (15.85%), respectively. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
8. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated Asia Pacific Growth Fund (Class B Shares) is
represented by a solid line, whereas Morgan Stanley Capital International Asia
Pacific Index is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated Asia Pacific Growth Fund (Class B Shares) for the
period from February 28, 1996 (start of performance) to November 30, 1997. The
"y" axis reflects the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Federated
Asia Pacific Growth Fund (Class B Shares) as compared to Morgan Stanley Capital
International Asia Pacific Index; the ending values are $7,359 and $7,082,
respectively. Beneath the list of components that correspond to the line graph
are the following average annual total return data for the Federated Asia
Pacific Growth Fund (Class B Shares): total return figures for the one-year
period and start of performance-to-date total returns are as follows: (28.36%)
and (15.99%), respectively. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
9. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated Asia Pacific Growth Fund (Class C Shares) is
represented by a solid line, whereas Morgan Stanley Capital International Asia
Pacific Index is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated Asia Pacific Growth Fund (Class C Shares) for the
period from February 28, 1996 (start of performance) to November 30, 1997. The
"y" axis reflects the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Federated
Asia Pacific Growth Fund (Class C Shares) as compared to Morgan Stanley Capital
International Asia Pacific Index; the ending values are $7,740 and $7,082,
respectively. Beneath the list of components that correspond to the line graph
are the following average annual total return data for the Federated Asia
Pacific Growth Fund: total return figures for the one-year period and start of
performance-to-date total returns are as follows: (24.90%) and (13.55%),
respectively. The performance disclaimer and footnotes are listed directly under
the graphic presentation.
10. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated Emerging Markets Fund (Class A Shares) is
represented by a solid line, whereas International Finance Corporation
Investable Composite Index is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
investment of $10,000 in the Federated Emerging Markets Fund (Class A Shares)
for the period from February 28, 1996 (start of performance) to November 30,
1997. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Federated Emerging Markets Fund (Class A Shares) as compared to International
Finance Corporation Investable Composite Index; the ending values are $10,999
and $8,554, respectively. Beneath the list of components that correspond to the
line graph are the following average annual total return data for the Federated
Emerging Markets Fund (Class A Shares): total return figures for the one-year
period and start of performance-to-date total returns are as follows: (0.94%)
and 5.58%, respectively. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
11. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated Emerging Markets Fund (Class B Shares) is
represented by a solid line, whereas International Finance Corporation
Investable Composite Index is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
investment of $10,000 in the Federated Emerging Markets Fund (Class B Shares)
for the period from February 28, 1996 (start of performance) to November 30,
1997. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Federated Emerging Markets Fund (Class B Shares) as compared to International
Finance Corporation Investable Composite Index; the ending values are $11,032
and $8,554, respectively. Beneath the list of components that correspond to the
line graph are the following average annual total return data for the Federated
Emerging Markets Fund (Class B Shares): total return figures for the one-year
period and start of performance-to-date total returns are as follows: (1.36%)
and 5.73%, respectively. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
12. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated Emerging Markets Fund (Class C Shares) is
represented by a solid line, whereas International Finance Corporation
Investable Composite Index is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
investment of $10,000 in the Federated Emerging Markets Fund (Class C Shares)
for the period from February 28, 1996 (start of performance) to November 30,
1997. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Federated Emerging Markets Fund (Class C shares) as compared to International
Finance Corporation Investable Composite Index; the ending values are $11,500
and $8,554, respectively. Beneath the list of components that correspond to the
line graph are the following average annual total return data for the Federated
Emerging Markets Fund (Class C Shares): total return figures for the one-year
period and start of performance-to-date total returns are as follows: 3.08% and
8.27%, respectively. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
13. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated European Growth Fund (Class A Shares) is represented
by a solid line, whereas Morgan Stanley Capital International (Europe) Index is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a hypothetical investment of $10,000 in the
Federated European Growth Fund (Class A Shares) for the period from February 28,
1996 (start of performance) to November 30, 1997. The "y" axis reflects the cost
of the investment. The "x" axis reflects computation periods from the ending
value of the hypothetical investment in the Federated European Growth Fund
(Class A Shares) as compared to Morgan Stanley Capital International (Europe)
Index; the ending values are $13,107 and $14,095, respectively. Beneath the list
of components that correspond to the line graph are the following average annual
total return data for the Federated European Growth Fund (Class A Shares) total
return figures for the one-year period and start of performance-to-date total
returns are as follows: 11.04% and 16.66%, respectively. The performance
disclaimer and footnotes are listed directly under the graphic presentation.
14. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated European Growth Fund (Class B Shares) is represented
by a solid line, whereas Morgan Stanley Capital International (Europe) Index is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a hypothetical investment of $10,000 in the
Federated European Growth Fund (Class B Shares) for the period from February 28,
1996 (start of performance) to November 30, 1997. The "y" axis reflects the cost
of the investment. The "x" axis reflects computation periods from the ending
value of the hypothetical investment in the Federated European Growth Fund
(Class B Shares) as compared to Morgan Stanley Capital International (Europe)
Index; the ending values are $13,202 and $14,095, respectively. Beneath the list
of components that correspond to the line graph are the following average annual
total return data for the Fund Name (Class Name): total return figures for the
one-year period and start of performance-to-date total returns are as follows:
10.86% and 17.13%, respectively. The performance disclaimer and footnotes are
listed directly under the graphic presentation.
15. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated European Growth Fund (Class C Shares) is represented
by a solid line, whereas Morgan Stanley Capital International (Europe) Index is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a hypothetical investment of $10,000 in the
Federated European Growth Fund (Class C Shares) for the period from February 28,
1996 (start of performance) to November 30, 1997. The "y" axis reflects the cost
of the investment. The "x" axis reflects computation periods from the ending
value of the hypothetical investment in the Federated European Growth Fund
(Class C Shares) as compared to Morgan Stanley Capital International (Europe)
Index; the ending values are $13,671 and $14,095, respectively. Beneath the list
of components that correspond to the line graph are the following average annual
total return data for the Federated European Growth Fund (Class C Shares): total
return figures for the one-year period and start of performance-to-date total
returns are as follows: 15.48% and 19.48%, respectively. The performance
disclaimer and footnotes are listed directly under the graphic presentation.
16. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated International Small Company Fund (Class A Shares) is
represented by a solid line, whereas FT-Actuaries/S&P World Medium-Small Capital
Index (ex-U.S.) is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated International Small Company Fund (Class A Shares)
for the period from February 28, 1996 (start of performance) to November 30,
1997. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Federated International Small Company Fund (Class A Shares) as compared to
FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.); the ending values
are $13,466 and $9,424, respectively. Beneath the list of components that
correspond to the line graph are the following average annual total return data
for the Federated International Small Company Fund (Class A Shares) total return
figures for the one-year period and start of performance-to-date total returns
are as follows: 9.87% and 18.47%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
17. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated International Small Company Fund (Class B Shares) is
represented by a solid line, whereas FT-Actuaries/S&P World Medium-Small Capital
Index (ex-U.S.) is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated International Small Company Fund (Class B Shares)
for the period from February 28, 1996 (start of performance) to November 30,
1997. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Federated International Small Company Fund (Class B Shares) as compared to
FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.); the ending values
are $13,687 and $9,424, respectively. Beneath the list of components that
correspond to the line graph are the following average annual total return data
for the Federated International Small Company Fund (Class B Shares) total return
figures for the one-year period and start of performance-to-date total returns
are as follows: 9.84% and 19.13%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
18. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated International Small Company Fund (Class C Shares) is
represented by a solid line, whereas FT-Actuaries/S&P World Medium-Small Capital
Index (ex-U.S.) is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated International Small Company Fund (Class C Shares)
for the period from February 28, 1996 (start of performance) to November 30,
1997. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Federated International Small Company Fund (Class C Shares) as compared to
FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.); the ending values
are $14,060 and $9,424, respectively. Beneath the list of components that
correspond to the line graph are the following average annual total return data
for the Federated International Small Company Fund (Class C Shares) total return
figures for the one-year period and start of performance-to-date total returns
are as follows: 14.36% and 21.41%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
19. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated Latin American Growth Fund (Class A Shares) is
represented by a solid line, whereas Morgan Stanley Capital International Latin
American-Free Index is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated Latin American Growth Fund (Class A Shares) for the
period from February 28, 1996 (start of performance) to November 30, 1997. The
"y" axis reflects the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Federated
Latin American Growth Fund (Class A Shares) as compared to Morgan Stanley
Capital International Latin American-Free Index; the ending values are $13,192
and $14,041, respectively. Beneath the list of components that correspond to the
line graph are the following average annual total return data for the Federated
Latin American Growth Fund (Class A Shares) total return figures for the
one-year period and start of performance-to-date total returns are as follows:
14.15% and 17.10%, respectively. The performance disclaimer and footnotes are
listed directly under the graphic presentation.
20. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated Latin American Growth Fund (Class B Shares) is
represented by a solid line, whereas Morgan Stanley Capital International Latin
American-Free Index is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated Latin American Growth Fund (Class B Shares) for the
period from February 28, 1996 (start of performance) to November 30, 1997. The
"y" axis reflects the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Federated
Latin American Growth Fund (Class B Shares) as compared to Morgan Stanley
Capital International Latin American-Free Index; the ending values are $13,279
and $14,041, respectively. Beneath the list of components that correspond to the
line graph are the following average annual total return data for the Federated
Latin American Growth Fund (Class B Shares) total return figures for the
one-year period and start of performance-to-date total returns are as follows:
14.03% and 17.52%, respectively. The performance disclaimer and footnotes are
listed directly under the graphic presentation.
21. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated Latin American Growth Fund (Class C Shares) is
represented by a solid line, whereas Morgan Stanley Capital International Latin
American-Free Index is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Federated Latin American Growth Fund (Class C Shares) for the
period from February 28, 1996 (start of performance) to November 30, 1997. The
"y" axis reflects the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Federated
Latin American Growth Fund (Class C Shares) as compared to Morgan Stanley
Capital International Latin American-Free Index; the ending values are $13,773
and $14,041, respectively. Beneath the list of components that correspond to the
line graph are the following average annual total return data for the Federated
Latin American Growth Fund (Class C Shares) total return figures for the
one-year period and start of performance-to-date total returns are as follows:
18.97% and 19.99%, respectively. The performance disclaimer and footnotes are
listed directly under the graphic presentation.
22. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated International High Income Fund (Class A Shares) is
represented by a solid line, whereas J.P. Morgan Emerging Markets Bond Index
Plus is represented by a dotted line. The line graph is a visual representation
of a comparison of change in value of a hypothetical investment of $10,000 in
the Federated International High Income Fund (Class A Shares) for the period
from October 2, 1996 (start of performance) to November 30, 1997. The "y" axis
reflects the cost of the investment. The "x" axis reflects computation periods
from the ending value of the hypothetical investment in the Federated
International High Income Fund (Class A Shares) as compared to J.P. Morgan
Emerging Markets Bond Index Plus; the ending values are $10,231 and $11,603,
respectively. Beneath the list of components that correspond to the line graph
are the following average annual total return data for the Federated
International High Income Fund (Class A Shares) total return figures for the
one-year period and start of performance-to-date total returns are as follows:
(0.69%) and 1.99%, respectively. The performance disclaimer and footnotes are
listed directly under the graphic presentation.
23. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated International High Income Fund (Class B Shares) is
represented by a solid line, whereas J.P. Morgan Emerging Markets Bond Index
Plus is represented by a dotted line. The line graph is a visual representation
of a comparison of change in value of a hypothetical investment of $10,000 in
the Federated International High Income Fund (Class B Shares) for the period
from October 2, 1996 (start of performance) to November 30, 1997. The "y" axis
reflects the cost of the investment. The "x" axis reflects computation periods
from the ending value of the hypothetical investment in the Federated
International High Income Fund (Class B Shares) as compared to J.P. Morgan
Emerging Markets Bond Index Plus; the ending values are $10,117 and $11,603,
respectively. Beneath the list of components that correspond to the line graph
are the following average annual total return data for the Federated
International High Income Fund (Class B Shares) total return figures for the
one-year period and start of performance-to-date total returns are as follows:
(2.36%) and 1.04%, respectively. The performance disclaimer and footnotes are
listed directly under the graphic presentation.
24. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the graphic
presentation. The Federated International High Income Fund (Class C Shares) is
represented by a solid line, whereas J.P. Morgan Emerging Markets Bond Index
Plus is represented by a dotted line. The line graph is a visual representation
of a comparison of change in value of a hypothetical investment of $10,000 in
the Federated International High Income Fund (Class C Shares) for the period
from October 2, 1996 (start of performance) to November 30, 1997. The "y" axis
reflects the cost of the investment. The "x" axis reflects computation periods
from the ending value of the hypothetical investment in the Federated
International High Income Fund (Class C Shares) as compared to J.P. Morgan
Emerging Markets Bond Index Plus; the ending values are $10,620 and $11,603,
respectively. Beneath the list of components that correspond to the line graph
are the following average annual total return data for the Federated
International High Income Fund (Class C Shares) total return figures for the
one-year period and start of performance-to-date total returns are as follows:
2.27% and 5.31%, respectively. The performance disclaimer and footnotes are
listed directly under the graphic presentation.
